New York Life Investment Management has seen a surge in sales of guaranteed income products for institutional investors, including retirement plans, in recent years and says it is weighing an expansion of its partially guaranteed products line.
The guaranteed products group reported $3.9 billion of sales in the first half and had more than $7 billion of annual sales in 2004 and 2003. New York Life competes with banks, including Citigroup Inc. and Bank of America Corp., which offer similar asset management services for institutional investors.
The company has seen significant demand, particularly from defined benefit plans, for a partially guaranteed offering that is tied to the Lehman Brothers Aggregate Index, said Richard Schwartz, a senior managing director in the insurer's investment management unit and the chief investment officer for its guaranteed products business.
For the partially guaranteed product, the underlying investment portfolio uses a core-plus strategy with the bulk of investments made in the Lehman index and up to 25% of the investments in high-yield debt instruments. The product has been popular among larger institutional investors because it outperforms the Lehman index while maintaining low credit risk, Mr. Schwartz said.
New York Life is weighing an expansion of its partially guaranteed products line but is waiting for more favorable debt market conditions, he said. Credit spreads for long-term debt are too low to warrant building out the product line, he added.
The company's efforts to diversify its guaranteed products line have contributed significantly to the business group's growth in recent years, said David Cruz, a second vice president responsible for pricing stable-value products and cash-flow management.
New York Life's recently introduced intermediate-term note program has proven particularly popular with investors, Mr. Cruz said.
"The medium-term note program has been a driver of our growth," he said. These debt programs are used by companies to create continual cash flows from debt issuance.
At March 31, 23% of the guaranteed products group's assets under management were in the medium-term note program. Fully guaranteed products make up the bulk, 38%, of the company's assets under management.
New York Life's guaranteed products group sells guaranteed investment contracts and other low-risk investment products, including group annuities, to institutional investors. Clients include 401(k) plans, defined benefit plans, and money market funds, among other institutional investors.
Smaller plans tend to favor a commingled fund that provides stable returns for institutional investors who lack sufficient scale to buy an individual guaranteed investment contract, Mr. Cruz said.
The company has benefited from offering a broad array of guaranteed income products, Mr. Schwartz said. "We have a diverse portfolio of high-quality products, and we are able to offer whichever one is attractive to the marketplace," he said.
New York Life's institutional guaranteed products are largely sold directly to institutional investors and through stable-value managers. The guaranteed products group managed more than $28.5 billion of assets at March 31, including $1.9 billion in separate accounts.
