Manulife Financial Corp. (MFC), Canada’s largest insurer, is expanding its asset-management business for institutional investors as it seeks to increase fee income.
The insurer, which manages C$575 billion ($549 billion) in funds, is focusing on real estate, commercial mortgages and private-placement debt for its new Manulife Asset Management Private Markets unit, the Toronto-based company said today in a statement. Manulife currently oversees C$14 billion of private-market funds for third parties and will look for additional investments from Canadian and U.S. insurers, pension funds and institutions, the firm said.
“It’s a win-win all around for Manulife and for investors,” said Kevin Adolphe, who oversees private assets at Manulife and will be chief executive officer of the new unit. “Fee-based revenue is less capital intensive and has a higher return. There’s tremendous value there,” he said in a phone interview.
Insurers including MetLife Inc. in the U.S. have added third-party management as they scale back from capital-intensive products such as variable annuities. Manulife CEO Donald Guloien, 56, has said he wants to raise the insurer’s core earnings to C$4 billion by 2016 from C$2.88 billion in 2012, and Adolphe said fees from expanded asset-management will contribute to that goal.
Manulife will add employees in sales, origination and client support as it expands the business, Adolphe said, while declining to provide figures. The company plans to “meaningfully” increase the amount of private-party assets the unit manages within the next three to five years, Adolphe said.
Brookfield Asset Management Inc., Canada’s largest alternative-investment manager that raised $7 billion for the world’s second-biggest infrastructure fund, would be a model for the new unit to emulate, Adolphe said. Toronto-based Brookfield’s asset-management arm generated $4.5 billion, or 24 percent, of revenue in 2012.
“Brookfield would be a competitor for us and we would like to get to that level,” Adolphe said. “It wasn’t so long ago that they started in this business and they’ve progressed quite well. If we get to the level of Brookfield, that would certainly be success.”
Adolphe said the unit could eventually expand to seek money globally or from high-net-worth investors.
“We’ve got a broad international distribution network with our Asian platform,” he said.
Manulife slipped 0.5 percent to C$19.62 at 4:00 p.m. in Toronto. The shares have gained 45 percent this year, outpacing the 17 percent advance of the 46-company Standard & Poor’s/TSX Financials Index.
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