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Published on March 29, 2008

 What should long-term investors do in such a situation?

Long-term investors such as life insurance firms - with whom many policyholders literally rest their lives - primarily hold bonds for security reasons and to help manage risk.

Usually, fixed-income investments make up at least half of an insurer's portfolio. But when yields from government and corporate bonds are now less than satisfactory, many are turning to equities.

Two very different companies, Ocean Life Insurance and Ayudhya Allianz CP Life, are taking different approaches to securing returns.

Ocean, one of the more traditional life insurance firms, with a large grass-roots customer base, will almost double its stock portfolio to 5.2 per cent from 2.8 per cent of its total portfolio a year earlier, said Nusara Banyatpiyaphod, deputy MD.

She manages the company's Bt46-billion investment fund.

"[The portfolio has] an average bond yield of 6.1 per cent last year. This number should come down this year," she said.

Although prospects for stocks will also drop this year, they will bring a significantly higher return of about 14 per cent, Nusara added.

Since Dayana Bunnag, former head of Kasikorn Asset Management, took the helm at Ocean, the firm has been scouting for talent to join its equity team.

Despite its aim of providing 7.4-per-cent returns in its overall investment schemes, it remains cautious and conservative. This year, it will increase its bond holdings to 42 per cent from 37 per cent last year.

It has not neglected other important areas such as housing loans - 17 per cent of its portfolio. The company has also sold some of its real estate and land holdings for development.

With a massive portfolio of Bt80 billion, AACP has always been bullish on stocks - particularly those in banking, property and financials.

Nikhil Srinivasan, chief investment officer for Allianz Insurance Management Asia Pacific, is waiting for the right dips to buy blue chips. Big-cap stocks provide liquidity, he said. AACP is currently holding about Bt8 billion in cash and other short-term investments, funds that are available to snatch up undervalued stocks should they appear.

Having overestimated the SET's ability to climb last year, Nikhil is now  more focused on individual stocks. AACP expects its holdings in banks such as Siam City Bank (SCIB) and TMB Bank to increase in value once good news breaks. That could happen when the Financial Institutions Development Fund sells off its SCIB shares or when ING Group announces new clear strategies.

"For me, long-term [strategies] will be applied when the stocks go up."

Ki Nan Tsui

The Nation