And such is the lay of the investment land today fund groups are making wide-scale strategic changes.
Aviva Investors, Scottish Widows Investment Partnership and Martin Currie are all examples of different reactions, over different periods of time, with different degrees of success to the new world though they do have one thing in common – a distinct shift away from UK/locally based propositions.
Lightweight
Each of these groups have undergone changes under different spotlights – Aviva Investors has been caned by the media, probably because (a) it is an easy target, (b) as the Evening Standard’s Anthony Hilton put it earlier this month: “Aviva Investors has long appeared to punch below its weight in financial terms”, (c) its parent company has a huge-but-not-great public profile, and (c) its parent company is a FTSE 100 company.
However, in among the headlines of job losses and cost savings is its strategic change of direction where Aviva Investors is now concentrating on fixed income, real estate and its multi-asset offerings. They key is that it is concentrating on those areas where it sees growth potential and already feels it has a strong competitive position.
The company is also changing its focus to regional centres of excellence which is seeing some movement away from the UK. The firm’s European equity centre of excellence is, for example, in Paris so its London-based role of head of European equities was made redundant in March.
SWIP is part of the way through a company-wide change of strategy where it is shifting its focus to global rather than regional propositions. Its fixed income business is already pretty much there in terms of any changes to offer global propositions, largely put in place under Mark Connolly as director of fixed income since January 2010.
Building a high yield team in New York is a clear statement of intent.
Surprise surprise
Francis Ghiloni, SWIP’s director of distribution and client management, explained that another driver for him is that investors want to move away from a fairly volatile middle ground of active equity funds that give, say, returns of 1.5% to 2% above a benchmark but a much higher volatility. Instead, they want either lower risk alpha funds or they are prepared to take more risk on the understanding there will be greater volatility. It is the surprise they do not like.
At the low risk/return/volatility end, this does not mean they want passive funds instead, but they want passive funds as well – something SWIP already has in place.
SWIP is still very much in the active equity fund space, Ghiloni confirmed, but the emphasis for the change of strategy is that investors are more than ever demanding a greater demonstration of value from whoever they give their money to. For him it is all about where they can best allocate resources bearing in mind what their institutional investors and clients are telling them.
It is a similar logic that saw Martin Currie change its fund proposition to get rid of its open-ended UK equity funds entirely.
Unless these firms have scale (Fidelity, Schroders, Invesco Perpetual) it is tough to be an across-the-board equity manager right now.
Those firms that are in the sweet spot right now – First State, Aberdeen – will continue to prosper while, all things being equal, those such as SWIP, Aviva Investors and Martin Currie will be better placed than they are now even though now is a painful period of transition.
It is now up to the others to make the right strategic decision for their own future and to move one way or the other – global, across-the-board, or regional – as staying still is a backwards move.
