Conning Steers Clients With $85 Billion From Bond ‘Gangplank’
Woody Bradford, who will take over as chief executive officer of asset manager Conning Inc. next month, said insurers should avoid riskier credits and long- duration assets as they seek to boost portfolio yields.
“Everybody’s afraid rates are going to jump, but at the same time they have to get yield,” Bradford said in an interview late yesterday after he was named the next CEO of Hartford, Connecticut-based Conning, which oversees almost $85 billion, mostly for insurers. “That’s the debate that a lot of people are struggling with, which is they want to creep out the yield curve, or they want to go deep in risk.”
Conning is seeking to add clients globally as insurers face pressure from declining portfolio yields amid near-record-low interest rates. The asset manager, which was purchased by Jeff Greenberg’s Aquiline Capital Partners LLC in 2009, struck a deal this year with Cathay Financial Holding Co. to expand in Asia and, in September, named a new head of investments for Europe.
“A lot of our message is, ‘Stay diversified, stick to your investment strategy,’” rather than take on too much risk, said Bradford. “The last time people did this, the ones who stepped out on the end of the gangplank, it didn’t work so well.”
Insurers including American International Group Inc. (AIG), Hartford Financial Services Group Inc. (HIG) and Lincoln National Corp. (LNC) took government bailouts after investments plunged in value in 2008. Hartford and Lincoln have since repaid the funds. AIG is majority owned by the U.S. Treasury Department, which is seeking to wind down its stake.
The current low interest rates have hurt investment income at companies including MetLife Inc. (MET), the largest U.S. life insurer. Treasuries have fluctuated over the past three months as European leaders tried to convince investors that nations in the region will be able to pay their debts. The U.S. 10-year yield rose to 2.42 percent on Oct. 28, after reaching a record low 1.67 percent on Sept. 23.
The average yield on MetLife’s more than $350 billion in fixed-income holdings sank to 4.8 percent in the three months ended Sept. 30 from 5.8 percent a year earlier, according to data on the insurer’s website. In addition to its bond portfolio, the life insurer is using funds to finance hard assets such as locomotives, power plants and real estate.
Conning has been discussing investments such as high- dividend equities, convertible securities and real assets, with clients, said Bradford. The firm tailors investment strategies to match insurers’ liabilities, he said.
Conning struck a deal to oversee about $8 billion for insurer Phoenix Companies Inc. in September.
Bradford joined Conning last year and was promoted to chief operating officer in September 2010. He’s a former operating partner at private-equity firm Advent International and held various roles at Putnam Investments, according to a statement from Conning. He has a bachelor’s degree from Worcester Polytechnic Institute and a master’s in business administration from Harvard Business School.
Bradford succeeds Salvatore Correnti, who led Conning for the last decade. Correnti will work in an advisory capacity as vice chairman, according to the statement.
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