Chillin' out till it needs to be funded
While LIC of India, the public life insurer has a book of INR 12 trillion or 20% of India’s GDP, it has its book across equities and other investments growing from INR 9 T ($200bn) with a new half Trillion entirely devoted to NTPC and secondary market purchases. Thus on its overall portfolio LIC has earned the fair bit of equity premium it needed to invest more into India’s new decade directly in the asset class.
The new investments from private insurers, that constitute the other half of new business in the industry lean towards unit plans that are tilted to a mix o debt and equity in 2 out of 3 options and 1 equity only option, de rigeur. The private assets by themselves would be at least INR 3-4T or $75-100bn)
It is not difficult to imagine therefore, that customers are eager to turn over from the INR 7 trillion MF Industry ( $175 bn) into miore of these Insurance Units with the current plans. Having witnessed hypergrowh, they do not want the ‘safer’ fixed income assets that underperform inflation to threaten their life savings, despite the additional risk premium.
But, I find it foolhardy on part of the investment fund managers to divert these funds to sector specific allocations and input the mandatory cause for distress and market failure event probability into my life savings calculation. I do not think that looks prudent enough in a unit based plan. May be a team of such institutional investors could together find a simple allocation of the large assets into specific infrastructure and not-there-yet sectors and build that theme, like we developed the market for ETFs and sector specific MF industry assets, even Infrastructure PE.