In the latest in our regular series, Portfolio Adviser hears from Warren Tonkinson, head of distribution at Perpetual Group (pictured below)
Which particular asset classes and strategies do you anticipate your intermediary clients focusing on in 2024?
We are seeing (albeit slowly and at the margin) clients returning to equities. Its clear that with rate hikes being delayed cash is still appealing but rates remaining high is also a positive sign for economic growth and the health of businesses. The robustness of both economies and businesses has surprised many clients and the return in equity markets has reflected this. We see clients looking for alpha here with a focus on those areas that have been out of favour and offer more upside like UK equities and emerging markets.
Should end-investors – and, by association, asset managers – be thinking beyond equity and bond investments? Towards what?
The market is very focussed on private markets right now and there has also been the move to much more passive. We would argue now is a great time to be looking at active management, market concentration is a short-term challenge but medium- and long-term opportunity for alpha. You also need to find the right kind of active managers to exploit this, those who have the freedom to deliver alpha, these usually exist within boutiques with strong incentive structures and greater intellectual independence.
To what extent do private assets and markets fit into your thinking? What are the currents pros and cons for investors?
These are clearly the topic du jour and whilst we don’t have an offering here it is something that would complement what we have in public markets. However, investors have to beware that returns over the next decade might not match those over the previous one with higher rates and more assets chasing a finite number of deals. Clients also need to be cognisant of liquidity and ensure they’re investing in the right kind of vehicles that suit their clients requirements. Long only equities continue to provide necessary counterbalance and reduce volatility, especially as the regulatory burden on private markets grow.
Given client and regulatory pressure on charges, how is your business delivering value for money to intermediaries and end-clients?
We work very hard to review both ends of the value argument, one being the price you pay and the other being what you get in return. As a multi-boutique asset manager focussed on active management and client service we are acutely aware of how our costs and charges benchmark versus peers. Regulation has also helped grow our awareness of this and ensure that what we charge is in-line with what we deliver and whilst active returns can be inconsistent over the short term delivering our clients superior service occurs throughout the relationship we have with our clients. We Are focussed on ensuring this remains best-in-class.
How much of your distribution is currently oriented towards climate change, net zero, biodiversity and other segments of sustainable investing? How do you see this approach to investing evolving?
As a multi-boutique we have several offerings completely focussed on sustainable investing. We have the systems thinking and thematic investing done by Regnan or the more stewardship based ethical investing from Trillium. We’re looking to expand our offering in the near future through our deep value boutique, Barrow Hanley. These specialists in their fields are able to deliver specific products and services and we continue to see demand from clients here, especially as each takes a distinct approach in style and approach. Across the broad range of products we also see regulators and clients pushing towards a higher basic level of adherence to key principles around sustainability. These topics are encapsulated in the stewardship code in the UK or SFDR in Europe where clients want to see some core areas covered in all the services they purchase from us.
How are you now balancing face-to-face and virtual distribution? In a similar vein, how are you balancing working from home and in the office?
In terms of clients we follow their preferences and we have clearly seen a move to more digital distribution. Clients are spending less time in the office and this leaves less time for face-to-face interaction with us. We are embracing this follow their requirements in how we contact and address them across the full journey they have with us. As a business for our teams we have embraced remote working and supporting the flexibility this allows whilst also understanding that working collectively in person also helps build and sustain relationships. We have adopted a hybrid approach with set working days for teams to spend more time together.
What do you do outside of work?
Outside of work, I’m an avid golfer and a lifelong Wolves fan – there’s nothing quite like the atmosphere at Molineux. I’m also passionate about food and drink and love experimenting with different cuisines in the kitchen. My most fulfilling role is as a trustee of Alexander Devine, a Children’s Hospice Service which provides specialist care and support to children with life-limiting and life-threatening conditions, and their families, across Berkshire and surrounding counties.
What is the most extraordinary thing you have seen in your life?
Without a doubt, the most extraordinary thing I’ve witnessed has been the unwavering strength and resilience displayed by families we support at Alexander Devine. They face unimaginable challenges, but the families and children approach each day with courage and dignity that is truly inspiring.
Equally remarkable is the generosity that Alexander Devine receives from the community. Between the volunteers and donors, the outpouring of kindness is overwhelming. It’s a testament to the human spirit.
Looking a little further ahead, in what ways do you see the asset management sector evolving over the next few years?
I’ll join the chorus on this observation, but I expect to see further consolidation within the industry, especially at an asset management and distributor level as firms seek to achieve economies of scale.
While passive investing has enjoyed considerable growth as of late, I believe we’re on the cusp of a renewed focus on active management. This will be contingent, however, on the ability of managers to deliver consistent alpha. As a result, we’ll likely see a reduction in the number of funds available, with a greater emphasis on quality and specialisation. Investors could expect more tailormade offerings that address their specific needs and risk profiles.
The regulatory landscape will continue to evolve, imposing additional burdens on the industry. It will be crucial for asset managers to navigate these challenges effectively while maintaining a client-centric approach.
