AXA aims to launch segregated funds next spring

By Alain Thériault | November 27 2007 05:53PM

AXA, which began its Canadian operations in 1987, is breaking new ground by launching a segregated fund line in April 2008.

Jacques Denis, vice-president, business development at AXA revealed this plan to an audience of over 100 AXA agents that gathered in Laval, Quebec in October for the launch of several new universal life features. Mr. Denis is also introducing two new universal life (UL) investment options that will be managed by

AXA Rosenberg Investment Management, an AXA subsidiary that has a constellation of over 21,000 investment companies that span the globe.

He pointed out that UK-based AXA Rosenberg is in the running to manage some of AXA Canada’s imminent segregated funds.

"We’re starting with two management accounts in our universal life, as we ease toward the individual investment sector," Mr. Denis told advisors at the training event. "We plan to launch a line of segregated funds in April, and AXA Rosenberg will certainly be one of the managers selected." 

The two UL options are an international management account based on the MSCI EAEO index and a Canadian account pegged to the S&P TSX.

AXA Rosenberg is also making its Canadian debut as manager of the investment options included in individual insurance products. Until now, the Canadian operations of AXA’s fund management subsidiary had been restricted to pension funds, with $1.6 billion CAD in assets under management. Assets under management in pension plans represent more than 40% of AXA Rosenberg’s global assets, which stand at $140 billion.

"We are seeing a seller’s market in Canada, and we have remarkable products that can add value," Rémi Casals, director of business development at AXA Rosenberg Europe told The Insurance Journal.

AXA Rosenberg strives to ensure individual investors’ peace of mind through an active management model that minimizes volatility. This quantitative model was developed by Barr Rosenberg, chairman of the board of AXA Rosenberg.Mr. Rosenberg is one of the founders of the modern theory of portfolio management, often called the quantitative or systematic approach. Armed with a doctorate from the University of Berkeley, California, Mr. Rosenberg has written several articles on his area of expertise, including the seminal works

The Prediction of Systematic Risk and Portfolio Optimization Algorithms, both published in the ‘70s.

Managers that apply this prudent investment model seek undervalued stocks of companies that are likely to experience earnings growth within the next 12 to 16 months. "We believe that investors could lose their patience beyond this period," Mr. Casals says. Stocks are selected using a software program that compiles abundant statistics and indicators to determine the firms’ intrinsic value.

For example, the software analyzes 200 "balance sheet items and operating accounts" of each company examined. Risk control is another pillar of this approach. Each portfolio is optimized and updated in real time "about every four minutes," which lets the manager actively control both overexposure and underexposure. To maintain a disciplined sales approach, the model systematically sells each investment that reaches a predetermined value.

Managing the credit crisis

Mr. Casals said that this systematic approach to selection and risk control has helped AXA Rosenberg boost its value by 2% to 3% over the long term, compared with the reference indexes. "It’s a stable and serene approach that rests on a very diversified investment universe, and that ably weathers turbulent periods such as the credit crisis that we saw this summer," he continues.

To give some examples of returns, the MSCI EAO Equity fund, recently grafted to AXA’s universal life, posted an annualized return of 3.28% between its inception in July 2000 and August 31, 2007. This amounts to added value of 1.76% compared with the benchmark index, which returned 1.52% during the same period. The Performance Strategy Central Canadian fund, the other universal life option, boasts a return of 15.09% between its founding in January, 1993 and August 31, 2007, topping the S&P TSX index by 2.89%.

Recognizing that the quantitative approach is just one of many, Mr. Casals describes the AXA Rosenberg funds as the "heart of a portfolio with a value focus" but adds that more aggressive managers are also on board.

AXA Rosenberg is currently enjoying steady growth: its assets under management have ballooned from $10 billion eight years ago to over $140 billion at June 30, 2007. AXA Investment Management holds a 75% stake in the subsidiary; the remainder belongs to the founders of Rosenberg Institutional Equity Management, including Barr Rosenberg. Formed in 1985, the firm concluded a strategic alliance with AXA Investment Management in 1999. It then became AXA Rosenberg. Kevin Martino manages the company’s Toronto office, opened in 2005.

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