Benchmarks

To ensure that we maintain a strict discipline in managing policyholder's funds, we have clearly articulated benchmarks for various unit-linked funds. In addition we also have strict deviation limits vis-à-vis benchmarks that ensure that we do not take undue exposure in any particular sector or stock. It is our endeavor to give better returns than the benchmark to policyholders for all the funds that we manage.

In summary, our investment process is a function of extensive research and is based on data and reasoning, backed by superior risk control measures. This, we believe, would enable us to deliver to our customers safety, stability and returns on their investments with us.

Assets held at June 30, 2018   In ` Billion  
Equity 47% 674.56  
Debt 53% 752.07  
Total 100% 1,426.63  
     
Asset held by:    
Linked policy holders 70% 997.34  
Other than Linked policy holders 30% 429.29  
Total 100% 1,426.63  

Average experience of the Investments team: 12 years

As a life insurance company, we know that our customers trust their monies with us for the long-term, and hope to use these funds to protect and achieve the dreams and aspirations of their families. With this in mind, our investment focus is to ensure long term Safety, Stability and Profitability of our customer's funds. Our aim is to achieve superior returns for a given level of risk. In order to meet this objective, we have developed an investment framework that is based on a sound investment process coupled with a rigorous and sophisticated risk management strategy.

Investment process

Our investment management process relies on analytics & research to achieve positive risk-adjusted returns in each product category, be it for child plans, retirement solutions or other endowment-related funds. We clearly define an asset allocation strategy that matches the risk characteristics of the corresponding liability, or put simply, we ensure that the promise we have made to the customer will be met.

The investment decision-making process has three tiers, each of which has varying degrees of discretion and considers detailed research in order to decide the best portfolio composition. The emphasis is to segregate the decision to buy a scrip from the process of actually buying it, and thereby institutionalize decision-making.

The average industry experience of the fund manager is 16 years in various aspects of market like research, portfolio management, trading, risk management etc. The top management teams at ICICI Bank and Prudential Corporation Asia ably guide the investment team in making the strategic asset allocation and continuously monitor the performance of the investment team.

Investment decisions

Debt investments target a mix of government and corporate bonds. The investment process is backed by intense research and analysis and comprises qualitative as well as quantitative measures. We make calls after carefully studying all the factors that influence interest rate direction, such as RBI policy and stance, inflation, growth of money supply, credit off-take, fiscal deficit, global interest rate scenario and market sentiment. Detailed research reports obtained from credit rating agencies form the primary basis for investment decisions. In addition, the team's assessment of economic cycle, industry health, its perception of management quality and demand and supply situation in stock of a particular entity influence the investment decision.

The investments in equity are targeted at long-term capital appreciation. We are not bound by traditional pure value or growth driven strategy and continuously look where both co-exist. Portfolio diversification lies at the core of our investment strategy. We have a clearly articulated benchmark for each of our funds and have well-defined deviation limits vis-vis benchmark at both the sector and stock level. We combine a top-down and bottom-up approach while choosing stocks for our investment, considering several factors like management quality, performance track record (in relation to the sector), dividend track record, transparency in disclosures, execution capabilities etc. Our equity portfolio has a large cap bias, as we believe that they offer higher risk adjusted returns. However we do invest in mid-caps provided they satisfy at least one of the criteria viz. presence in high growth industry, one of the industry segment leaders, niche player, offer a play on outsourcing opportunity or structural turnaround in performance. Thus the focus is on ensuring consistent, stable and better risk adjusted performance over long term for our policyholders.

Comp/doc/Feb/2018/0913.

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