Buy, hold, sell: Actuaries and CFA asset types

Actuaries and the broader public received an insider’s view into the different personal investment approaches practiced by multiple industry leaders in a Virtual Insights session into asset management. Moderated by independent consultant and actuary Andy Yang, attendees heard from various executives and senior actuaries at AIA, Prudential Corporation Asia, Prudential Malaysia and Taiping Life.

Director and former Council Member of the CPA Australia Hong Kong-China Division, Sebastian Bombaci, described his family’s asset portfolio as fairly balanced, but with a low to moderate risk – a 40% holding in property, with shares and cash making up the rest.

(L-R) Andy Yang, Sebastian Bombaci, Andrew Tang, Robert Chen, and David Grundy.

“Property is the best performing asset class, returning on average 9% per annum, compared to a superannuation fund returning 6% per annum,” Sebastian said.

Sebastian agreed with a question from one of the event’s participants that property is better termed land speculation – especially in Australian cities.

“Most of the value of single dwellings [in Australia] are based on the land value – it’s not as easy to apply that in a place like Hong Kong, Singapore, or Manhattan where land is beyond the reach of most people anyway.

“The most important driver of property asset values was being the ideal location,” Sebastian explained.

Director of Group Business Strategy at AIA, Andrew Tang, described his investment process as largely emotional, and only partly rational. That was a fine approach to take, as long as you were still working towards the goals you had defined.

“We as actuaries think very rationally and quantitatively, but most of our customers don’t think like us, they’re 80% emotional and 20% rational in how they choose their investments, so as actuaries we should keep that in mind,” Andrew told the audience.

It was important to retain some flexibility for what Andrew described as “seemingly irrational behaviours” when investing, to make sure you were still happy with your investments.

Being mindful of public policy could be an important aspect of investment decisions, according to Deputy CFO at Taiping Life, Robert Chen, when discussing insights on personal investments drawn from observing the developments in China over the last twenty years.

“If the Government is putting a lot of resources into developing an area, then selecting a property in that area could potentially give you some good potential upside. This is like selecting a property with renovation potential,” Robert added.

The breathtaking growth of the Chinese economy presented a multitude of investment opportunities. With the rapid pace of innovation and regulatory change that is taking place everywhere in the world, Robert urged the audience to maintain an open mind towards new types of investments, but any participation should be closely monitored and kept within one’s risk tolerances.

David Grundy, Regional Director, ALM at Prudential Corporation Asia until his recent retirement to Australia, examined the option of placing your retirement funds in a lifetime annuity, compared to a DIY approach comprising an investment strategy and a drawdown strategy.

Investing in an annuity avoids the likelihood of being left with unused assets, he told the audience. Given his intention to spend his retirement funds, he regards leftover assets as wasted assets.

“While an annuity protects you from fraud and theft, and from making mistakes with your investments, flexibility was lost if you later decided you didn’t want an annuity arrangement anymore,” David added.