With the Pension Fund Regulatory and Development Authority (PFRDA) setting the ball rolling for the new pension system, the Hague-headquartered company is also seeing immense opportunities in the pension sector as well.
Vimal Bhandari, country head, India, Aegon, and Sarvjeev S Sidhu, global head of emerging markets, Aegon USA Investment Management, spoke to Rajesh Abraham
What is your market strategy for India? You seem to be late in entering the country?
VB: In the past few years, Aegon has expanded its international presence, particularly in Asia and Central and Eastern Europe. Our joint venture with Religare, the financial services arm of the Ranbaxy Promoter Group in India, to establish a life insurance and asset management venture is a part of that expansion.
What are your views on the reforms in the pension sector?
VB: India has a massive, but largely unorganised labour force. That, combined with the breakdown we've seen of traditional methods for providing security for old age has created a need for pension products and a vibrant pension fund management market.
Policymakers are aware of this need and are striving to address it by reforming the country's pension system. Naturally, we are following the reforms in the pension sector with some interest. Among other things, these reforms would allow pension products to be offered by private players.
As the sector opens up, the market will widen and deepen as more products become available and consumers have greater choice. This clearly opens up new opportunities for companies such as Aegon.
Is Aegon raising more money for the Indian equity markets globally?
We believe there is a strong case for investors and asset managers abroad to increase the amount of money they commit to the Indian market. Aegon is very optimistic about India.
We continue to explore opportunities so that our customers worldwide can benefit from the Indian growth story. India is not only perceived as a higher-return market, but also as an avenue for investors to diversify into assets that have a relatively low correlation, thereby giving investors an opportunity to generate risk-adjusted alpha.
We look forward to providing Indian equity products, among other asset classes, as a part of the suite of products on offer to global investors. We are establishing an asset management venture, which would also look at offshore opportunities as well as building up a domestic mutual fund business.
You already have $160 million portfolio investments in India. How much will it increase over a period of 1-3 years?
VB: Aegon has invested about $160 million in the debt instruments issued overseas by Indian companies of international repute. Over the next three to five years, Aegon expects this amount to multiply as more and more Indian companies seek to raise debt capital overseas.
We are hoping to have an exposure of over $300 million over the next two years. We would also evaluate opportunities to invest in other asset classes including equity and structured products.
Two booming segments in India from a funds' perspective are the private equity and real estate funds. What are your plans for these segments?
SS: We believe the alternative asset classes of real estate and private equity are bound to grow as India's economy matures. Gradually, India's economy will develop alternative mechanisms for financing growth that do not necessarily rely on equity markets alone.
This means not only that new sources of funding would become available, but that international investors could be drawn to the Indian market by new asset classes. So we expect to witness both a deepening and a widening of India's capital markets.