MetLife Inc., the largest U.S. life insurer, will add asset management for institutional investors as part of chief executive Steven Kandarian's push to expand fee income.
The insurer, which has an investment portfolio worth more than $500 billion backing policyholder obligations and generating shareholder returns, will focus the initiative on real estate and private-placement debt, areas in which it already invests.
Clients will include other insurers, pension plans and sovereign-wealth funds, the company said in a statement last Tuesday.
Mr. Kandarian, who was promoted last year from chief investment officer, is scaling back capital-intensive products such as variable annuities as he seeks to increase MetLife's return on equity to at least 12% by 2016.
The new effort will be overseen by chief investment officer Steven Goulart, a former banker at The Bear Stearns Cos. Inc., who joined MetLife in 2006.
“It's not a capital-intensive business; it's a high-return business,” Mr. Goulart said. “It certainly fits well strategically with the direction of MetLife.”
MetLife will add about 20 people over the next year, including staff members in fundraising and marketing, to assist money managers already working for the insurer, he said.
The company is in “active conversations” with potential investors, Mr. Goulart said. He declined to name them.
Potential clients may warm to a newcomer to the field because some of the best money managers have limits on new investments, he said.
GOULART'S GOALS
“Our goal is to be one of the top five institutional real estate investment managers,” Mr. Goulart said. “We think we can certainly be one of the top managers in the private-debt space, as well.”
Wall Street firms such as
BlackRock Inc. and JPMorgan Chase & Co. are vying to manage money for institutional investors seeking returns made scarce by the Federal Reserve's pledge to keep borrowing costs low to stimulate the economy.
Lloyd Blankfein, chief executive of The Goldman Sachs Group Inc., and president Gary Cohn wrote in the bank's 2011 annual report that outsourcing of asset management by insurers has accelerated because of “new capital regimes, greater demand as a result of the financial crisis and a sustained low-interest-rate environment.”
MetLife's expansion may in-crease competition with life insurers, including No. 2 Prudential Financial Inc. and Principal Financial Group Inc. Prudential Investment Management has about $650 billion under management, with funds in commercial real estate, as well as stocks and bonds, according to its website.
American International Group Inc., once the world's largest insurer, sold its third-party asset manager, PineBridge Investments, in 2010 as part of a plan to repay its U.S. government bailout.
Shares of MetLife (MET) had gained 13% year-to-date as of last Tuesday, compared with a 14% advance by shares of Prudential (PRU).
Robert Merck, MetLife's head of real estate investments, will lead the new operation — called MetLife Real Estate Investors — managing funds for both institutional clients and the insurer. Mark Wilsmann, who has led MetLife's commercial-mortgage portfolio management operation since 2003, will head a new group focused on real estate equity investments.
Brian Casey, from the insurer's Washington office, will lead a separate real estate debt strategies organization.
Scott Inglis, MetLife's global head of private securities, will head the insurer's private-placement-debt group. The operation will manage assets including private corporate debt, equity in renewable energy, and project finance and infrastructure debt.
