UPDATE 1-Manulife to expand private asset management business

Mon Nov 11, 2013 3:02pm EST

By Euan Rocha

TORONTO Nov 11 (Reuters) - Manulife Financial Corp , Canada's largest life insurer, said on Monday it plans to expand its private asset management business, allowing clients its such as pension funds to invest in timberland, farmland, real estate and private equity assets.

Toronto-based Manulife, which manages money for pension plans, sovereign wealth funds, endowments and midsized insurers, said the expansion will open up a range of new investment opportunities for such clients and institutional investors.

The company has funds under management of some C$575 billion ($549.11 billion), of this, roughly C$265 billion is managed on behalf of such third-party clients.

Kevin Adolphe, who will head Manulife's new private markets asset management segment, said the move comes as institutional clients are allocating more of their money in such assets.

"It has been a challenging five years for institutions, and when you take a look at private market assets, they have offered a good stable source of yield, and relatively lower volatility than a lot of public market assets," he said in an interview.

The insurer has a long history of investing in private placement debt, commercial mortgages, farmland, timberland, real estate and private equity, along with energy and infrastructure assets. But until now it has largely used funds from its own general account to invest outside of public markets.

The firm has C$74 billion of private market investments and only $14 billion of this comes from third party investors.

Adolphe said the vast majority of the $14 billion is now in its Hancock Natural Resource Group, which invests in timberland, farmland and renewable energy projects.

"What we're going to be doing is expanding the offering for institutional clients," he said, adding that the firm plans to allow clients to put money into commercial real estate lending, commercial mortgage lending and private placements.

BET ON BLACKBERRY

BlackBerry Ltd last week disclosed that Manulife was among the firms investing in its $1 billion convertible notes offering. The embattled smartphone maker stunned many investors when it abandoned plans to sell itself, named a new interim chief executive and outlined its debt financing plan.

In a regulatory filing, Waterloo, Ontario-based Manulife said four funds are investing a total of $70 million in the notes offering after two initial investors, Brookfield Asset Management Inc and Markel Corp opted to pare the size of their initial investments.

Adolphe declined to comment on the BlackBerry investment.

Manulife has spent the last few years working to reduce its exposure to financial market volatility after falling stock prices and bond yields led to massive quarterly losses following the 2008 financial crisis.

Last week, Manulife reported a quarterly profit that topped analysts' expectations, driven by strong wealth and mutual fund sales and higher bond yields.

The company, which traces its roots back more than 125 years, was once headed by Canada's first prime minister, Sir John Macdonald. Besides its Canadian operations, Manulife owns U.S. insurer John Hancock and it is also growing in Asia, where it is present in about a dozen countries.

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