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John Hancock- The Right Carrier for Large-Case Success
Learn how John Hancock’s Alternative Long Duration Asset (ALDA) strategy helps deliver lasting value to our policyholders. This Q&A with Scott Hartz, John Hancock’s Chief Investment Officer, provides insights about the factors that make our ALDA approach so effective. What unique benefits does John Hancock’s ALDA investment strategy offer? Because of the accounting and capital regimes most US life insurance companies follow, they back their products almost entirely with fixed income investments — even though from an economic perspective one should back long liabilities with equity-type investments. For instance, in the current rate environment, a long, fixed income portfolio should expect a return between 5 and 6 percent, whereas a non-fixed income strategy would expect to return double that, between 9 and 12 percent. Because John Hancock’s parent, Manulife, is a Canadian company, our accounting and capital regimes are more favorable to using a greater proportion of non-fixed income, or ALDA investments, for long liabilities, which can ultimately benefit our policyholders. How do our in-house investment capabilities set us apart in the life insurance industry? Because John Hancock is more willing to invest in non-fixed income, we have built up capabilities in many non-fixed income asset types over the past 20 to 40 years. Drawing on this expertise, we manage timber, agricultural, real estate, infrastructure and private equity investments, not just for our insurance products but also for third parties including pension funds, endowments and other insurance companies. This deep experience allows us to create a diversified, high-return portfolio for our insurance products. What sectors comprise John Hancock’s ALDA portfolio and which one do you see as providing the most opportunity over the next 6-12 months? We invest in six categories: real estate, infrastructure, private equity, timber, agriculture and energy transition. We are excited about the opportunities created by the ongoing energy transition, hence the need for capital to support it. This is further fueled through incentives created by the Inflation Reduction Act in the US, which present opportunities that cut across many of our ALDA categories. Timber and agriculture are natural carbon sinks, with potential that has yet to be fully reflected in valuations. A portion of our infrastructure portfolio includes renewable power plants and industrial-sized batteries. And most directly, we have a private equity energy-transition strategy that covers the spectrum of energy-transition solutions including hydrogen storage, charging stations and solar-racking systems to name a few. What’s the advantage of an ALDA strategy over a public equity strategy? Public equities are also a fine choice for long duration liabilities and are the appropriate choice for individuals who do not have access to ALDA. ALDA, however, provides roughly the same long-term return as public equities at a much lower volatility due to the diversified nature of the ALDA investments. Over roughly the past 20 years, our ALDA portfolio has been about one-third as volatile as public equity. The lower volatility of ALDA allows us to get comfortable with a much larger allocation than we could with a public equity strategy. So, similar return, but a much lower risk. Do you have a favorite deal in the portfolio That’s a bit like asking which is your favorite child. We love them all. Since most are real, tangible investments, they are quite interesting. They include things like newly constructed bridges in Pennsylvania, the Port Miami Tunnel, a large data center in Washington state, forests on the coast of Oregon and cranberry plantations in Wisconsin. We make investments in real assets across the United States that create jobs and provide strong, inflation-protected returns. Learn more |