How does the investment strategy of an insurance company differ from a mutual fund?
A mutual fund is essentially a short-term product and for their managers liquidity – inflows and outflows – is a big worry, which is why the churning of portfolios is relatively higher. However, this is not the case with life insurance for two reasons. One, there is tremendous potential for growth as there is a large untapped market available. Hence, liquidity is not an issue as life insurance companies always witness net inflows not only from the new policies but also from renewal premium of old policies on a regular basis. The other advantage is that Ulips are long-term products that help investors to save systematically to achieve their financial goals such as retirement or child’s future amongst others. Thus, the objective of the life insurance fund manager is to give a superior risk adjusted return over a long term period. Being a long-term investor, are you predominantly large-cap focussed? We adopt a conservative investment philosophy as we sell a lot of policies in tier-II and
