Manulife CEO Guloien Plans Commodities Bet as Prices Near Bottomby
Manulife CEO says copper, zinc may be attractive soon
Canadian insurer says commodities add to diversification
Manulife Financial Corp., Canada’s largest life insurer, is looking to add more commodities to its investment mix after prices plunged for metals including zinc and copper.
Manulife wants to diversify its portfolio, which ranges from timber to cranberries, to limit risk while finding higher-yielding assets, Chief Executive Officer Donald Guloien said in an interview. The Toronto-based insurer is discussing how best to add commodities without physically storing them or becoming a mining company.
“The commodity cycle has turned in a fairly negative way,” Guloien, 58, said Tuesday at Bloomberg’s New York headquarters. “I’d like to play more in the commodities business. People are still going to need commodities - they’re going to need copper, they’re going to need zinc. We have a couple ideas and we haven’t decided yet."
Manulife has been diversifying its holdings since the financial crisis, when its bet on variable annuity products wiped out profit for two straight quarters. Under Guloien, who took the helm in 2009, the company expanded its investments globally and across asset classes. The insurer now has its hands in everything from oil and gas operations to office towers across the U.S. and cranberry bogs in Wisconsin.
Manulife said this year it would consider purchasing oil and gas assets in Alberta as the price of oil dropped by half and energy companies began slashing jobs and growth plans. Manulife invests in commodities via its Hancock Natural Resource Group, which oversees about $14 billion in timber, agriculture and renewable-energy holdings. Manulife had more than C$880 billion ($660 billion) in assets under management and administration as of June 30.
The price has to be right for any commodity bet, Guloien said, and he isn’t convinced they have hit rock bottom yet. A Bloomberg gauge of industrial metals, including copper, nickel and zinc, declined 21 percent this year as China’s slackening economy prompts investor concern about reduced demand.
If prices “continue to go down for the next couple years, there will be a time to buy in,” Guloien said. “We’re not there right now, we’re in no rush to get in. We don’t know that it’s bottomed yet.” He declined to provide details on how Manulife would invest, only saying it may be similar to how the insurer bets on agricultural commodities.
“By diversifying our bets, we reduce risk enormously,” Guloien said. “We want to be in all parts of the economy. Parts of the economy that we don’t participate in that aren’t available to people in public markets -- that’s what we’d like to look at.”