The Peak speaks to Luis Valdes, President and CEO of Principal International, one of the world’s largest asset management and investment companies, and Director of CIMB-Principal on their range of products in Malaysia and South-East Asia. Among other things, he spoke on the opportunities in financial security sector in South East Asia.
Tell us how you got started and walk us through your background in the asset and investment management industry.
As president and CEO of Principal International, I lead our global pension operations spanning 10 markets and serving 17 million individuals in emerging countries. I’ve been at Principal for more than 23 years, always working within our global operations. Prior to joining the company, I held several positions in public service in Chile, including Insurance Commissioner. Following my tenure with the Chilean government, I was hired by a local consortium in the early 1990s to start a life insurance company. When looking for a joint venture partner for the consortium, I was introduced to Principal and worked with them to secure a joint venture arrangement. In 1998, I joined the company to run the Latin American operations as regional vice president, becoming president in 2010. In 2011, I assumed my current role as President and CEO for Principal International.
Was there one particular moment in your early years in the industry, a piece of advice you received for example, that has shaped the way you approach your work?
From early in my career working in an emerging market with the Chilean government in the 1980s, I learned how to be a goal-oriented person, a “doer” who understands the importance of thoughtfully developing a plan and strongly executing it. I also learned the importance of being open to innovative ideas and new ways of doing things. We had to do almost everything over again, including reshaping our strategy, thinking how we could do things differently and developing legislation to better help social and economic development. But we also had to be thoughtful about how we put things back together. During my time as a civil servant, in my role as the leader of a startup insurance company, and even today as I lead Principal International, I use these same skills in my entrepreneurial leadership style.
Principal is one of the biggest names in asset management worldwide. Tell us more about Principal and its scope of services globally.
Principal International was established in 1990 with a mission dedicated to helping middle class citizens in emerging markets plan and invest for their financial security through our retirement and longterm savings solutions. We offer our products in 10 emerging markets (China, Hong Kong, Malaysia, Thailand, Indonesia, Singapore, India, Chile, Mexico, and Brazil) along with advisory services. With USD300 billion in combined AUM including China, Principal International markets cover 50 per cent of the world’s current population – including 48 per cent of the world’s millennials, a key customer segment as we look to expand digitally. With USD667.8 billion in assets under management (as of September 30, 2018), Principal serves 22 million customers throughout Asia, Australia, Europe, Latin America and North America. We have a rich, nearly 140year history in retirement, insurance and asset management in the U.S. and that knowledge and expertise has been critical to growing our international operations. We share a common goal across Principal globally to make progress possible for our customers, in a way that is sustainable, ethical, and aligns with the values of the cultures we serve.
Principal International is part of CIMB-Principal Asset Management Berhad here in Malaysia. What are your thoughts on Malaysia? How is the industry growing, and in which direction do you see it heading in the near future?
There is an immense opportunity to improve financial security for Malaysians. Like many parts of the world, pension and retirement savings are too low. With the current replacement rate in Malaysia being less than 40 percent, lower than the OECD advised rate of at least 70 percent, people are not saving enough. This environment creates opportunities for a company like Principal to leverage its global expertise to provide locally tailored pension, savings and investment solutions in Malaysia. With a strong local presence, and through our partnership with CIMB, Principal has the expertise to deliver on the need for increased voluntary retirement savings solutions in Malaysia and Southeast Asia. Additionally, we are investing in digital capabilities and broadening the ways we reach customers through digital channels to improve financial literacy and communicate with millions of potential middle-class customers in a convenient way, providing sales and advice through mobile access to their accounts.
We are also increasingly collaborating with governments and key stakeholders to advise on locally appropriate, effective pension systems that will provide better long term financial security. This includes increasing personal savings rates for mandatory programs to help improve replacement rates, building a strong solidarity pillar, developing incentives to encourage employer participation with matching programs and expanding coverage for individuals by enhancing voluntary programs to include economic incentives.
What are your thoughts on the South East Asian region? Are there any international events that might affect, positively or negatively, the industry in ASEAN?
We recognise the tremendous opportunity to increase financial security in the South East Asia region through our long-term savings and retirement solutions. Demonstrated in the growth of the pension and asset management industry – 12 to 13 percent annually over the last 4-5 years, our long-term view on emerging markets continues to be very positive.
Near-term effects from international events, including economic headwinds, trade tensions and market reactions to national elections around the world may create market volatility, but we have not changed our view on these countries because the demographic demand drivers for our investment solutions remain. The ageing population is going to continue to grow, helping fiscally constrained governments solve the problems of their ageing society is a constant need, and this era of personal responsibility is going to be more important than ever.
Finally, do you have any advice for our readers on which assets to keep an eye out for in the coming years?
Each client’s needs are different, depending on how long they will be invested and their risk profile. From a high-level perspective, we recommend investors make sure they have the appropriate diversification in their portfolios, with the right asset allocation more than individual products. The key to building a sufficient and sustainable investment portfolio is to make sure you are diversified. That will help you reach your investment goals.