For AAM, Relationships And Geography Are Key Assets An IAM Exclusive
September 18, 2013
Asset Allocation & Management Company, LLC, or AAM as it is better known, is one of a small number of asset management firms that specialize solely in managing portfolios for insurance companies. This exclusive focus has paid off handsomely in AAM’s three decade lifetime (its 30th anniversary was celebrated in 2012), as exhibited by the firm’s nearly 100 insurance clients. A year ago, AAM hired a new director of marketing and business development, Colin Dowdall, CFA, and IAM editor Alex McCallum took the opportunity of his first anniversary to get Dowdall’s assessment of the post- crisis insurance asset management field, and the part that AAM is playing in its development.
IAM: After celebrating the 30th anniversary of AAM in 2012, how is the first year of the fourth decade shaping up, and how much has changed since the financial crisis for specialist insurance asset managers like yourselves?
Dowdall: The firm has continued to enjoy success on the heels of celebrating our 30th anniversary by further helping our clients to navigate a very challenging and unpredictable interest rate environment. Our most recent client satisfaction survey indicated nearly a 100% satisfaction level in working with AAM with many of our clients citing the proactive relationship management structure being a key driver in their level of satisfaction.
Since the financial crisis, we have seen a deeper focus across our client base in understanding and quantifying risks. We operate in markets where correlations can quickly increase, and insurance companies are looking to their asset managers to help them implement an investment strategy that fully integrates with their firm-wide enterprise risk framework. Our client- centric approach gives us the advantage of focusing the entire firm’s resources to support each client’s specific risk framework. Rating agencies and regulators will continue to focus on this, and we believe that we are well positioned to partner with clients to stay ahead of these issues.
IAM: This past June, John Olvany, a Morgan Stanley alumnus, joined your team. How difficult is it to find experts in the field of insurance asset management, and is the situation improving, or not?
Dowdall: Given the niche market of insurance asset management, we have found that there is a small talent pool for experts who understand the needs of insurance companies. We were fortunate to welcome John Olvany to the team bringing over 25 years of experience in the fixed income markets, including working with many of the largest insurance companies.
In addition to adding talented individuals such as John to the organization, AAM has had a long-standing commitment to promoting talent from within. The insurance investment industry requires a highly specialized skill-set, and we are focused on identifying bright, motivated individuals and giving them a platform to continue to grow and share in the firm’s success.
IAM: AAM is one of only a few insurance asset managers that are based in the Midwest, in your case, Chicago. Does this central US location indicate that your business development strategy is North American (including Bermuda and Canada), or do you anticipate going more aggressively global at some point soon?
Dowdall: YouarecorrectinpointingoutthatAAMisoneofonlyafew insurance asset managers based in the Midwest. We believe the Chicago location to be very strategic and a key selling point for our clients. Positioned in the middle of the country, we have easy access to nearly every corner of the country, and our investment culture is often one that integrates well with our clients.
While the industry trend has been to focus on building global platforms, we believe that there is great value to focusing our time and resources on the North American insurance market including the Bermuda insurers. We continue to find that some North American insurers are underserved and undervalued by the investment marketplace. Over time, we believe that this focus will open up new growth opportunities for our firm and other firms who put a strong emphasis on the North American market.
IAM: AAM has been an early adopter in developing the sub-advisory model through a relationship with Zazove Associates for the management of convertible bonds. In 2012, you added Muzinich & Co. for high yield and bank loans. Do you anticipate adding more relationships in the future?
Dowdall: AAM’s relationship with Zazove goes back over 20 years, which we believe to be the longest-standing and most successful sub-advisory relationship in the insurance industry. We anticipate that the investment solutions we offer to insurance companies will continue to grow as our clients look to further diversify their investment portfolios. We expect to announce shortly a third sub-advisory relationship which will further deepen the investment offerings to the marketplace.
We believe our clients deserve best-in-class portfolio managers across all investment strategies, and recognize that our clients’ interests are further served by having specialized managers that have a strong ownership culture. In addition, clients expect their managers to be able to customize their strategies to incorporate their unique requirements. All of these are important elements of AAM’s sub-advisory partners, and key reasons why we believe that this model will continue to be successful for our clients.
IAM: Thank you.
Disclaimer: Asset Allocation & Management Company, LLC (AAM) is an investment adviser registered with the Securities and Exchange Commission, specializing in fixed-income asset management services for insurance companies. Registration does not imply a certain level of skill or training. This information was developed using publicly available information, internally developed data and outside sources believed to be reliable. While all reasonable care has been taken to ensure that the facts stated and the opinions given are accurate, complete and reasonable, liability is expressly disclaimed by AAM and any affiliates (collectively known as “AAM”), and their representative officers and employees. This report has been prepared for informational purposes only and does not purport to represent a complete analysis of any security, company or industry discussed. Any opinions and/or recommendations expressed are subject to change without notice and should be considered only as part of a diversified portfolio. Any opinions and statements contained herein of financial market trends based on market conditions constitute our judgment. This material may contain projections or other forward-looking statements regarding future events, targets or expectations, and is only current as of the date indicated. There is no assurance that such events or targets will be achieved, and may be significantly different than that discussed here. The information presented, including any statements concerning financial market trends, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. Although the assumptions underlying the forward-looking statements that may be contained herein are believed to be reasonable they can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. AAM assumes no duty to provide updates to any analysis contained herein. A complete list of investment recommendations made during the past year is available upon request. Past performance is not an indication of future returns. This information is distributed to recipients including AAM, any of which may have acted on the basis of the information, or may have an ownership interest in securities to which the information relates. It may also be distributed to clients of AAM, as well as to other recipients with whom no such client relationship exists. Providing this information does not, in and of itself, constitute a recommendation by AAM, nor does it imply that the purchase or sale of any security is suitable for the recipient. Investing in the bond market is subject to certain risks including market, interest-rate, issuer, credit, inflation, liquidity, valuation, volatility, prepayment and extension. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.