Fonds de Réserve pour les Retraites (FRR) is proposing a way for UK-based managers to skirt around Brexit uncertainty, IPE reported. France’s €36 billion pension reserve fund is currently seeking a European small-cap manager to run €1.1 billion, as well as a domestic small-cap specialist for €600 million; all applicants based outside France must have a European fund passport. FRR is advising British managers to appoint an “alternative candidate” registered in the EU or EEA, who could take over the mandate if the UK firm loses its European passport, and then outsource investment management back to the UK shop.
FRR expects to complete its tender process in April 2019, shortly after the UK leaves the EU. It was concerned that UK-based managers might be discouraged from applying, especially given that some small-cap specialists are boutiques without international branches. “We wanted to allow them to apply as a UK-based candidate,” said Anne-Marie Jourdan, Chief Legal Officer and Head of Public Relations at FRR. “It might not be a perfect solution and we hope there’ll be a soft Brexit, but we preferred to be prepared for a hard Brexit.”
Reposition or retreat, BCG tells managers
Boston Consulting Group (BCG) warned asset managers to guard against a false sense of security and predicted that profit margins will decline. “The strong performance of asset managers in 2017 was market driven. It should not disguise the trends that are squeezing profits,” BCG stated. “[Managers should] use this moment of strength to position themselves for a business environment that may look very different in five years, transformed by new technologies and changing customer demands. If they don’t, they face a future of persistently eroding margins.”
If recent trends will continue, BCG expects profit margins to fall from 38 per cent at the end of 2017 to 36 per cent in 2021. However, if markets experience a severe correction followed by a slow recovery, margins could dip to 27-30 per cent.
As a percentage of AuM, fees have declined by 3 per cent a year for the last three years. Migration from active to passive strategies is not to blame, BCG said; that trend is being offset by demand for higher-fee alternative investments and solutions. Instead, institutional investors, retail distributors and regulators are driving a shift towards lower cost strategies.
On the other side of the scales, regulatory reform is pushing up operating costs and managers are investing in technology. “Most asset managers are experimenting with digital labs, hiring data scientists, and testing the use of alternative data. Few, if any, have developed these at scale, but we expect this to change soon,” BCG observed.
Besides digital disruption, other major trends include M&A activity and China’s growth. “The partial opening up of the Chinese market is creating a gold rush for foreign firms. However, their role in the market, from much of which they are still excluded, remains nascent,” BCG observed. “Domestic players are already innovating, often in partnership with fintechs, and experiencing explosive growth.”
BlackRock, Schroders back fintechs
BlackRock is investing in a start-up to target millennials, while Schroders has announced the first candidate for its in-residence fintech programme.
BlackRock led a $50 million investing round in Acorns, a US app that automatically invests spare change from users’ everyday purchases into diversified ETF portfolios. BlackRock and Acorns will work together to develop new technology-enabled tools for Acorns’ users.
The world’s largest manager is hoping to learn techniques from its junior partner for reaching younger investors. “Acorns is a pioneer in creating innovative ways to engage investors in a mobile-first world. By deepening our understanding of how their customers use investment technologies, we can apply those learnings across BlackRock to evolve the products we build for our distribution partners,” said COO Rob Goldstein.
BlackRock’s stake, the size of which was not disclosed, was funded from its balance sheet, rather than clients’ assets. Chief Marketing Officer Frank Cooper will have an ‘observer seat’ on Acorns’ board.
Separately, Qwil Messenger has joined Schroders’ Cobalt programme. The instant messaging app enables businesses to communicate directly with clients in different jurisdictions, whilst complying with data privacy and protection requirements. Graham Kellen, Schroders’ Chief Digital Officer, said Qwil Messenger “provides a secure and reliable platform which meets the growing regulatory demands placed on client communication, particularly with GDPR coming into force in the European Union this month.” For the next six months, the fintech will receive access to desk space, resources and potential investment.
Managers step up Brexit preparations
US-based managers MFS Investment Management and Principal Global Investors (PGI) are seeking permission to establish EU hubs in Luxembourg and Dublin, respectively. Meanwhile, Columbia Threadneedle Investments (CTI) is transferring as much as €7 billion of European clients’ assets from 20 of its UK OEIC funds into equivalent Luxembourg SICAVs.
MFS plans to expand its seven-strong Luxembourg bureau by hiring people locally and/or transferring staff. “We’re all investing time and money planning for the most unfavourable outcome,” Madeline Forrester, Managing Director, UK Institutional Business, told Reuters. “We view this as making a long-term investment in our Luxembourg office, but whatever the result of the final deal, we have to look after our clients and that means preparing for a ‘hard’ Brexit.”
PGI has applied for a MiFID licence in Ireland and intends to open a Dublin office, staffed with local hires. It already has an Irish UCITS platform, but no employees on the ground, having run its European operations from London.
For CTI, moving EU clients’ assets will provide certainty and continuity, and “ensure they can continue to access our best investment strategies in a UCITS-compliant fund, regardless of the final agreement between the UK and the EU,” said Michelle Scrimgeour, CEO, EMEA.
Robeco and RobecoSAM have pooled their resources to establish a Trends & Thematic Investment team and hired Mark van der Kroft to run it. The team was created by merging Robeco’s trend unit in Rotterdam with two RobecoSAM thematic groups based in Zurich, as the sister companies seek to strengthen their ties. Sustainability specialist RobecoSAM recently won a $1.4 billion thematic mandate.
Van der Kroft spent 16 years at Robeco in various senior roles, including CIO Equity Investments. He moved to NN Investment Partners in March 2017 to become Director of Strategic Institutional Business Development. He returns to Robeco at the helm of an 18-strong investment team with €7 billion under management.
Meanwhile, RobecoSAM’s CEO Aris Prepoudis is leaving and will be replaced by Daniel Wild and Marius Dorfmeister. Wild, who was Head of Sustainability Investing Research and Development, will take on advisory role to the Robeco’s executive committee. His co-head Dorfmeister was Head of Global Clients and Marketing.
AXA Investment Managers has hired Matthew Murtagh from Oaktree Capital Management as a Senior Consultant Relations Manager in London.
Derrick Dunne, the former CEO of Sanlam Four, has been named CEO of Beaufort Investment Management.
DWS (formerly Deutsche Asset Management) has hired Neel Mehta from Mayfair Equity Partners as CFO of its private equity business.
Three former BlackRock analysts and a recruitment specialist have launched Eterna Capital, a VC fund to invest in blockchain projects with an ESG tilt. Andrea Bonaceto, who established HiredGrad in 2014, is CEO. BlackRock’s Asim Ahmad, Mattia Mrvosevic and Nassim Olive serve as Head of Portfolio Management, Head of Research, and Chief Economist & COO, respectively.
Hermes Investment Management’s fixed income team has hired Andrew Lennox from BlackRock as an Asset-Backed Security Portfolio Manager and Stephan Michel as a Senior Portfolio Manager. Michel previously founded and ran consultancy Essem4.
Invesco has added Schroders’ Tom Sartain to its fixed income team as a Senior Portfolio Manager to work on multi-sector strategies.
Investec Asset Management has expanded its multi-asset team by hiring Portfolio Manager Imran Ahmad. He previously managed Standard Life Investments' Emerging Market Debt Unconstrained fund.
JLT Employee Benefits has named Michael Wray as COO and Director of Strategic Investment Solutions. He was previously a Senior Investment Solutions Designer at Fidelity International.
Philippe El-Asmar has joined J.P. Morgan Asset Management as Head of Asia Beta Strategies, a newly-created role in Hong Kong. He was CEO of Amareos, a financial news analytics firm which he co-founded.
Janus Henderson Investors has hired two European equity analysts: Tom O'Hara from Exane BNP Paribas and Tom Lemaigre from RWC Partners.
Kempen Capital Management has brought in Athole Skinner as a Senior Investment Manager in its European small-cap team in Edinburgh. He previously established and ran Hirta Investment Research.
MetLife Investments Asia has named Lesley Lo as Institutional Sales Director, Asia ex-Japan. She previously worked in business development at BNP Paribas Asset Management.
Old Mutual Global Investors’ multi-asset business, which will rebrand as Quilter Investors at the end of June, has made a suite of hires. Fiona Woodhouse from Janus Henderson becomes Chief Risk Officer, Alex Risby from Royal London Asset Management joins as Head of IT, and Brown Advisory’s Matt Leary is the new Head of Operations. Maziar Alamouti from Agilis Investment Management will become Head of Dealing, while Aberdeen Standard Investments’ Daniella Johnston has been named Head of Marketing. Shawn Rea and Deborah Nash are moving across from OMGI as Head of Finance and Head of Legal, respectively.
Gary Moglione has joined Seneca Investment Managers as a Fund Manager, responsible for international developed market equities and fixed income research. He will also work with CIO Peter Elston on asset allocation. He hails from Amundi, where he managed €5 billion in European equities.
Xafinity Punter Southall has named Simeon Willis as its first CIO. He was KPMG’s Head of Investment Strategy.