If you forced me to pick just one important unifying theme from nine hours of discussion with senior leaders in European and US asset managers it would be this: sustainability. Being sustainable is a business necessity, an investment and risk strategy, and a sales opportunity. It is also a way of addressing the tired old question about asset management, one I have heard asked for two decades: ‘What do we need to do to get people to trust us and understand what we do?’ The aim of the Citywire World of Asset Management (WAM) was to go beyond soundbites, delve deep into important issues in asset management and come up with some kind of blueprint for change. We asked three questions in each session: what is current best practice; what needs to change; and what are the first steps. In this Journal, you will find several blueprints – six in all – representing the nuggets from each session. We held sessions with chief executives, chief investment officers and heads of distribution or marketing. As well as the blueprints, we have extracted the meat (or meat substitute) of the discussions represented by quotations from the participants. For good measure, we have also included the full transcripts with minor edits requested by participants. Having chaired many events, I have often found that it is only when you read the full transcripts that you get to the heart of what people were saying – undercurrents of tension, disagreement or nuances that were not as noticeable in the live event can appear later in the transcripts. There is a lot of really rich material in this Journal. Angus and I would be happy to discuss it with any of you and, if convenient, to appear on panel sessions with your clients – virtual ones, that is! We are all virtual now, and, while face-to-face is definitely coming back, the genie is well and truly out of the bottle. We will never return to 100% face-to-face. Or as one participant said, there is no turning back. Given the richness of the discussions, I have prepared a bullet-point summary below. This is subjective and not placed in any order of importance. I posed the question, ‘what did I find interesting?’ The answers are below. Getting my apologies in early: I haven’t included something from every participant, but you can be sure everyone is featured somewhere in the Journal of Asset Management. Thank you very much for taking part in the Citywire World of Asset Management. We hope that this will become a landmark event, one which seeks to examine in detail both the good practices and those that need to change. Over the years, we will measure that change and hopefully reflect on a sustainable set of improvements for the benefit of everyone involved – asset management companies and their employees, and of course the billions of people whose savings you look after.
BACK TO TOP
We are all sustainable
(or should be)
Session
World of Asset Management Journal
01
Strategy Tuesday:
Diversity and inclusion
Read more
Sustainability
02
ESG: Changing priorities of the CIO
Positive themes post-Covid
Investment Wednesday:
Working and winning with technology
The future of service
Business Thursday:
Key Points:
Asset managers still feel poorly understood. Even by people who have recently joined them. This came up in separate discussions on diversity and inclusion and on sustainable investing. Don’t leave this to industry bodies – individual groups need to be more forceful in explaining what they do. My view on this is that sustainable investing gives asset management an opportunity to rectify this. They need to do this with clarity and real stories of what they have done to make companies more sustainable or improve the world. ‘I am bored with generic discussion on the topic [of ESG],’ one CIO said, and I totally agree with this.
Be careful of reducing everything to a number. Or, as one CEO said, do not let measurement become the god of everything. Measure, but measure in a context. This quote came up in the diversity and inclusion discussion where some CEOs were measuring the heck out of everything. Interestingly, it also came up in the sustainability discussion with CEOs. It may make perfect investment sense to invest in a company with ‘poor’ ESG practices, as long as you can engage with them and help them improve. But that also risks flak from the wider society, and, in an era where everything is measured, it can mean your ESG rating for your portfolios are adversely hit.
The nuances of ESG. This example is one of several nuances discussed in the field of ESG/sustainable investing. There is broad agreement that ESG should be integrated in the investment process (including risk management and portfolio construction). But as one of the US gatekeepers who made a guest video appearance said, what some firms call integrated she calls not integrated. Conversely, a fund selector guest waxed lyrical over green bonds, but some CIOs were wary of companies issuing ‘green bonds’ for non-green purposes or for green purposes which could be funded from existing cash flow.
Technology has much further to go. For an industry that prides itself on being able to spot and invest in technology winners, asset managers get a poor score on their own technology, both from their own executives (sometimes) and some of their clients. But things are improving. Not only can data and technology be used to measure their own performance in a more granular way (fund manager X never makes good investments on a Friday afternoon), but the hope in the distribution and marketing arena is that it can be harnessed to produce timely relevant information for clients – and actionable information for asset managers. You are not there yet but you know where you want to get (somewhere akin to the Amazon or Netflix recommendation system).
Re-defining fiduciary duty. There were suggestions that this now includes social purpose, or the wider interests of society, and is not just about making money. This is a live issue with some asset management groups putting the onus on companies to look beyond pure shareholder return. There is some pushback on this from the US Department of Justice.
Diversity and inclusion. It is obvious that some asset management groups are doing an enormous amount on the subjects of diversity and inclusion. All recognise that they need to do more. Humans are not dead. Real engagement with companies needs real people. Some quant firms have struggled. Dispersion of likely future returns needs human judgement. This is an alpha market, not a beta one.
Citywire’s vision for the World of Asset Management was to get beyond soundbites to important tangible lessons. Over a three-day period we held six 90 minute discussions with more than 20 senior executives drawn from a range of asset management groups with filmed guest appearances from senior gatekeepers and fund selectors from the US and Europe. Each session deliberately covered just one topic, such as sustainable investing, diversity and inclusion, or investment opportunities post-pandemic. We covered three broad areas: strategy, with chief executives; investment with chief investment officers; and business with heads of distribution. Discussions were chaired by both Lawrence Lever, founder and chairman of Citywire, and Angus Foote, director of Europe.
Participating asset management groups:
Lawrence Lever, chairman and founder, Citywire
strategy tuesday
introduction
next
home
Numbers are vital in asset management, but beneath the numbers are people. This discussion was about diversity and inclusion in asset management. It was about people, feelings, behaviours and values. There was both a recognition that asset management isn’t yet where it wants to be and an awareness of how things could improve. Speaking to chief executives for this roundtable, the disagreements they had were more about emphasis than substance. For example, all the participants are measuring how well they are doing, but there was concern that measurement can become a compliance ‘tick box’ exercise. There is no money attached directly to diversity or inclusion. But allowing for multiple perspectives and creating an environment where people can be encouraged to express them will improve thinking and ideas, as well as investment decisions. This is a journey and there is still much to be done. But everyone who took part very much wants to get there. Coming out of the discussion, we formulated a six-point plan.
action points for DIVERSITY AND INCLUSION
Grow your own timber and focus on early-stage hiring. Get the diverse pipeline going early from the entry point to asset management groups.
Promote what asset management does as an industry and profession. Every firm should do this, rather than rely on its trade body. There is an opportunity now. The Covid-19 crisis was not borne of finance, but finance can be the solution.
Very important attributes that leaders must demonstrate and make sure flow throughout their companies include trust, transparency, respect, recognition and creating safe spaces for self-expression. Recognition, not only in terms of feedback or promotions but acknowledging the difference and discomfort of others and creating an environment to alleviate that.
Allocate capital to areas of need. Work more closely with underserved diverse communities and the companies that work in those communities. This includes charitable contributions where firms need to do more than just write cheques, but also engage with the charities they support. It can include directing charitable contributions that can be channelled towards fighting inequality. Asset management firms as global institutions have the opportunity to allocate capital to areas of the world and help communities there make a living.
Create a more flexible and fluid work environment to appeal to young entrants into the workforce.
Measure how you are doing, but measure in a structured transparent way and with context. Don’t turn this into a compliance function.
Diversity is not about appeasing the lobby that shouts loudest. It’s about attracting people from different backgrounds, cultures, religions and social strata. I think it’s a necessary part of an intellectual capital business and shouldn’t be something you simply comply with.
Hendrik du Toit, Ninety One
We’ve had the most extraordinary conversations in the last couple of months with our different ethnic communities about their experiences of racism around the world and it has been quite shattering. There have been very upsetting sessions, hearing our colleagues talking about their experiences of racism back to primary school. The firm is now ready to change. A lot of that inclusion goes to the question of who, in the end, wants to work in our industry. Can we attract the people we want to attract who are not cut all from the same cloth?
Hamish Forsyth, Capital Group
When we look at what diversity means to us, we are not where we want to be and neither is society for that matter. Our communities need to embrace a greater love of diversity and culture.
Tom Finke, Barings
There’s an element of measuring, but it comes back to whether you have a culture that promotes serving not just your clients, but your community and each other. When you think about serving each other, I think that can lead to a more diverse culture and can lead to an ‘ownership interest’ with your employees, what you do and the purpose of the company.
When we talk about diversity and inclusion, there’s a business element and we ask: how can we gain a competitive advantage? Inclusion usually comes when you have transparency, when people have autonomy to do things, when you maintain a growth mindset, instead of one that stifles debate or the idea of taking something and making it better.
Erich Gerth, BlueBay Asset Management
01/23
02/23
03/23
04/23
05/23
What diversity is... and isn’t
the future of service
ESG: changing priorities of the CIO
positive themes post-covid
sustainability
diversity and inclusion
working and winning with tech
Find out more about this session
read transcript
in their own words
Strategy tuesday
session one
We’re benchmarking the heck out of ourselves. We’re benchmarking ourselves against our local recruitment markets and the available talent, and, where we can, against our competitors. We’re benchmarking ourselves against other industries and we’re looking at that data all the time. Annually, we share that data with the whole firm. There’s a lot of scrutiny on whether the numbers start moving faster than they have done historically.
The difficulty of measuring diversity
06/23
Why wouldn’t we measure ourselves? In fact, if we’re going to be the judge, we have to judge ourselves and that goes beyond doing the measurement that’s being required either by investors or regulatory entities. It’s really purified that transparency back into the company and, frankly, we have to get better at it. I’m not happy with where we are in terms of measurements or transparency. I think we can measure more. We can do more, but it’s a process that isn’t going away and we should be measuring ourselves.
07/23
I think the idea of measuring makes perfect sense, but you want to be measured in a way that’s structured. The community point is a good example of approaching this with some structure. When it came to charity, we brought an outside group in to really structure the way that we thought about volunteering and contribution and charity. By doing so, we were able to significantly increase both the charitable giving and the participation of those within the organisation.
08/23
If there is one thing we’ve really tried to push through the organisation, it is transparency in every aspect of our business. Every person should understand your financials, everyone should know your pipeline, everybody should know how you’re doing as a business. Everyone should know the one or two most important things right now. If you don’t, it’s very difficult to get the kind of inclusion you want. It’s also very difficult to move the needle because everything cannot be top-down, it has to go through the organisation and many of the ideas will come from other parts of the business, not from senior management. Putting some structure around things and adding transparency are critically important in moving the dial on this kind of thing.
09/23
It’s very important in a diverse and an inclusive organisation that you develop trust. Trust is not always shouting when some number is out of line or not the same as everyone else’s because we’re not going to index ourselves as firms. We are ourselves and I think by being yourself as a business and having a culture of being yourself and comfortable with yourself, you can be truly inclusive and ultimately, diverse.
Hendrik du Toit, ninety one
10/23
If we think about inclusion, we as leaders have a responsibility for personal disclosure, to some extent, about what we are OK with. I have personally had to make it much clearer that I don’t mind who finds love and where they find it; it is all good. It’s odd at some level that it needs to be said so clearly, but people need to trust that we’re serious about these topics. That is trust at a very individual level.
Trust, respect and safe spaces
11/23
Respect is really important and is not that often used in the debates around diversity and inclusion. Respect means space for everyone to express themselves. Understanding the other’s otherness and not just driving towards a bland sameness.
12/23
I like differing views. You don’t want everything to be the same. In fact, I think that great managers of the future, indeed the great companies of the future, will be companies that have embraced that diversity of thought and that diversity of speech, not just the diversity of gender or race.
tom finke, barings
13/23
If you have a mindset where you’re searching to figure out who is accountable for something that went wrong or didn’t go as well as expected, it feeds through the business regardless of the individual and their background, but they don’t feel they can speak up. I’ve seen it by making some changes in the way we deal with errors. These things, as we’ve made those changes and implemented them, start to change the culture. I think it’s tied very closely to trust. Trust has to be foundational to any business; it has to be deeply embedded in the culture.
14/23
Sometimes you have to push recruiters to do their homework to attract people. It doesn’t just happen when you go out to the market, you have to start recruiting for that position by creating a reputation for your firm as a place that champions diversity and respectful discussion so your reputation will, hopefully, help you attract more diverse quality candidates.
The ‘pipeline isn’t diverse enough’ argument
15/23
The answer to this is the issue of pipeline and early career hiring. We have transformed our early career hiring to really lead on diverse candidates and catching people early. The earlier we can hire them, the greater the chance we have of giving all those diverse candidates those skills so that they can succeed.
16/23
We’re in a crisis now where, for once, it wasn’t caused and created by finance, but where finance is part of the solution. If we don’t use this moment collectively in the industry and individually as businesses to explain to our stakeholders what we actually do – which is apply the capital of society sensibly for the long term in order to create opportunities in those societies and indeed the world – we will only have ourselves to blame.
17/23
We need to be far more forceful. We’ve seen some improvements in the industry bodies, but it’s actually at firm level where we always need to start and say, what do we really do?
18/23
If we pick up anything from the Covid experience, I think work environment is important. We still create an environment that is probably not as attractive, fluid or flexible as what is required in the world we work in today. If we use some of the lessons learnt from Covid, to change the work environment, we can meaningfully improve the culture, diversity and inclusion of our businesses.
The importance of the work environment
19/23
We’ve got to put more capital into diverse communities. We have an opportunity to direct capital into underserved communities. We have the ability to direct capital towards business owned and led by women and minorities and I think we need to up the ante on that. It’s not just writing cheques. It’s one thing to write cheques, it’s another thing to engage, to meet people where they live.
Directing capital into areas of greatest need
20/23
As a global industry, we’re living in a world where walls are going up, where, particularly, the rich world is lifting the drawbridge in order to be charitable at home. They sometimes forget the disasters they create: the response to Covid saw rich countries suddenly looking after their own with capital drying up for the poorest of the poor, such as the victims of climate change caused by the rich countries. Spreading capital around the world and making sure people in many communities can make a living is probably the best contribution we can give to an inclusive society. There is no point knocking over statues of slavers of 300-400 years ago while you withdraw money from those very communities where those people were taken from in such a brutal way.
21/23
Recognition is crucial, but it’s not just about saying, ‘well done, you did a good job’. Instead, it’s if you put yourself in somebody else’s head, if you truly recognise what it feels like to turn up in a carpark and find there are only three other black people walking into work and it’s been that way for 15 years, you’d do something about it
Recognition
22/23
Backing businesses that create wealth does the most for society. If you can increase the pension pot of people who can then send their children to university, you’ve really done something good. Our objective of generating competitive returns can add significant value as well, and we mustn’t forget that.
Delivering returns creates opportunities for all
23/23
previous
No topic courts controversy in the world of asset management quite like ESG investing. This session took in a broad range of topics and saw plenty of respectful disagreement. A lack of consistency across the board was a recurring theme. This ranged from the varying ways of integrating the ESG process and unclear definitions of key terminology to the approach of asset managers themselves being inconsistent with the sustainable values they look for in other companies. Communication was also raised. Asset managers are not good at informing the public of what they do, and ESG presents a good opportunity to highlight this. A good quotation to sum this up is that of Aviva Investors’ Euan Munro. He said: ‘We have to explain what our task is and our task is not necessarily to look good, it’s to be good and be doing good.’
action points for sustainbility
Proper integration must include investment analysis, portfolio construction and risk management. ESG teams should not be separated from the rest of the investment team. Passive providers must focus on engagement, as they cannot not hold ESG stocks in their index-based products.
Collaboration is needed to establish a set of definitions for broad terms such as ‘sustainable’, ‘impact investing’ and ‘ESG integration’. To deliver positive societal change and improve the emissions problem, asset management groups have to collaborate more on holding companies and their boards to account.
Company boards must explain how their activities have a bearing on social and environmental issues. For example, technology companies that exploit their workforce ought to be held to account.
Asset management is poorly understood. One of the best ways of conveying what it does is through sustainable investing activities. Finance did not cause the current crisis but is part of the solution – by directing capital into areas of need. Generic conversations about ESG are not enough. Concrete examples are necessary.
We want to make sure that our assets are invested with a long-term perspective that is in our end clients’ interests. That’s better achieved through engagement, rather than exclusion. The portfolios and major benchmarks that exist at the moment reflect the world we operate in; not holding a sector is just removing ourselves from the debate. We feel it’s best to stay in the debate, engage with corporates, argue for improvements on the ESG vectors, and try to make sure that we help create the world that people want to retire into. I sometimes talk about it being easier to build a portfolio that is going to not cause me any problems or keep me out of the newspapers – it’s really easy to build that portfolio. It’s much harder to change the world; we think that changing the world is achieved through engagement rather than exclusion.
Euan Munro, Aviva Investors
This isn’t a policy decision for the industry, it has to be an investment decision and to us at BlackRock, it’s rooted in a long-term belief that paying more attention to the risks associated with sustainability, climate change, now social injustice has come very much to the fore. Companies that really have an eye to these risks and managing them and trying to improve their position on all of those, they are going to produce better long-term risk-adjusted returns than those that aren’t.
Robert Fairbairn, BlackRock
We are going from a world of two dimensions to a three-dimensional world of risk-return and ESG impact. The fiduciary duty of managers will evolve into something that goes not only to the client performance we deliver, but also, what we deliver to society.
Fiona Frick, Unigestion
We find that today’s generation is far more community driven, far more purpose driven and far more caring about leaving the world a better place than when they got here. The most important part of the journey is that the road has to be paved with authenticity: we really have to be authentic as to who we are as an organisation. The journey can’t be forced; it has to be organic, particularly on the investment side.
Douglas Sieg, Lord Abbett
The word ‘integration’ used to mean something more specific than it does today, ie the range of what people consider integrated. ‘ESG-integrated’ is very, very wide, and that’s where I’m seeing problems in terms of how to describe your investment approach, because what one person calls integrated, I do not.
Anna Snider, Bank of America Merrill Lynch
01/25
02/25
03/25
04/25
05/25
Best practice for sustainable investment
Integrating ESG
Fiduciary duty redefined
session two
A lot of people believe that it has to be dedicated individuals working on ESG. I think if one does a really good job, every one of your analysts should have an ESG lens. It should be embedded into the firm culture, and analysts or portfolio managers should use the ESG factors as they see fit in analysing investments and making investment decisions. It has to permeate through the organisation.
Ray Joseph, UBS
06/25
We’ve been voting for decades, but I think it’s fair to say that it’s only been much more recently where the risk takers on the investment team really paid much attention to where the ESG team were voting and really got stuck into that debate. One of the things that we definitely were failing on was that it was something other than our core investment process.
07/25
Ultimately, it’s all going to be completely integrated in every portfolio that we manage inside our groups. These are risks like any other risks that we’re now finally measuring and doing something about. The US is going to catch up very quickly because you’ve got much more centralised portfolio management through models. I think [ESG integration] is very much here to stay.
08/25
You have to think about how social change is likely to impact the companies in your portfolio, with all of the debate about Black Lives Matter or social exclusion that’s been amplified during the Covid-19 pandemic. If you’re going to do this properly, you have to be building ESG into your risk management and portfolio construction.
09/25
I don’t want to hear anybody ask me, ‘is a more diverse team a better team?’. We know the answer is yes. We have to figure out how to create a more inclusive environment and be better in terms of diversity. We also understand, particularly now, living through Covid-19, that a more sustainable organisation is a better investment. If you think about the disrupted supply chains, we’re all seeing this happen in real time. It’s now going to be a leadership issue and it’s going to be about change.
Diversity, inclusion, leadership and resilience
10/25
We’re entering a period now where there is much more emphasis on resilience rather than efficiency. Resilience resonates with sustainability. It is a period where we go from maximised efficiency and therefore fragilities, to a period where resiliency and sustainability will be much more important.
11/25
But there’s no doubt that data generated by our own portfolio managers suggests that a more sustainable organisation or investment, over the longer-term, will lead to better risk-adjusted returns. I think that’s at the very heart of all this. We clearly all believe that on this call, but it’s incumbent on us to prove it over and over again. We’ve got to get far more sophisticated in that, in demonstrating that all forms of E, S and G are going to lead to better outcomes.
Proving concept
12/25
You have to work on defining yourself and your own criteria, but it would be good if there was more consensus about the way ESG is measured and more transparency around the methods to make sure that we understand it.
13/25
Taxonomy is incredibly important for our own products. We interplay ESG and sustainability. We’ve used screened products and sustainable overlays. Having a clear taxonomy across the industry around our products and our processes is a really important starting point. An impact fund has about five different descriptions.
Definitions
14/25
As fund managers, if we’re not to be entirely replaced by algorithms, we have to justify our human analytic elements. What I want is companies to give me the narrative that goes with their approach. For example, some tech companies are wasteful on energy with their massive banks of computers. Some of them also have terrible gig economy-type contracts with their employees, who have no job security. Are they part of the long-term solution for a more cohesive society if they’re going to give people no job security? If we think their labour practices are exploitative, we will talk to them about it and warn them that we will vote against the executive remuneration packages unless they address that. We’re going to be facing a period of high unemployment and companies will be taken to task as to how responsible they’ve been with their workforce.
The importance of narrative
15/25
I think the incredibly intense focus on the short term, has created a lot more volatility and that needs to be addressed. If could change one thing, it would be the short-term focus.
Short termism abounds
16/25
The industry tends to be a ‘me too’ industry. When somebody gets a good idea, everybody wants to rush to try the same idea. There are standards that asset managers can collaborate on. All of them focusing on how they’re going to try to solve this problem may allow for more innovation in the short term.
Collaboration between asset managers on sustainability
17/25
I don’t necessarily interpret the US Department of Labor positioning as bad because I think it continues to force us to be authentic and to be a fiduciary. As long as we keep the central thrust of all this as these are risks to our clients’ portfolios, we need to understand them and manage them. If that ends up being a sustainable label inside a 401K mandate, we will be able to defend ourselves.
18/26
The obvious area for collaboration is on taxonomy, but also about the critical data that we’re going to need and about forcing boards to provide narrative. How we then interpret that is going to be a matter of competition, but I think we could line up and say, we really want boards to be able to explain themselves and explain how they’re going to reduce risk by better behaviour on all of the ESG vectors.
18/25
In 2008 the financial service industry was seen as the devil, while today we could be part of the solution. Perhaps we see the difference between our US colleagues and Europe because in Europe we see a sort of regulation pressure to make sure that the fiduciary duty of asset managers doesn’t go only to clients, but also to society. In fact, society is a stakeholder of the asset management industry. When we invest and engage with the money, we have a responsibility towards our clients, but also towards society on a larger scale. We are facing the same movement from shareholder to stakeholder and the fiduciary duty responsibility going to the client, but also to society.
Serving clients and society at large
19/25
One of the roles we’ve got is to connect people with their assets. They are not our assets. Connecting those people with their assets and giving them a voice is one of the tricks we’ve got to pull off as fund managers. Increasingly, we’re going to have to facilitate our customers being able to vote their shares whatever way they want. There will need to be a technological solution to that as well.
20/25
I like the idea of everyone voting because in some way it would take away the noisy characters that disagree with our votes, but it’s a little bit of a dodge of our role, which is to use the votes appropriately to make sure that these assets that we manage are in companies that are doing a good job. I think it’s an interesting debate. I’m more intrigued by us all, as an industry, doing a far better job telling the world what we do.
21/25
If you’re properly integrated, you’re engaging with the CEO and the CFO, not just with the chair and not with just the senior investment director, but with the people running the business. You’re engaging with that level and you’re interested in their narrative about how they’re facing ESG issues because very often chairs can be specialists at this, leaving the CEO and the CFO to run the firm.
22/25
Several participants believe fiduciary duty should cover more than pure financial concerns – for example, duty to communities, broader society and social good.
Regulation forcing asset managers to publish a number indicating how ESG-friendly their funds are could harm investment and social good by deterring fund managers from investing in poorly scoring companies with poor ESG records but that are good investments and willing to improve.
Some things cannot be fixed by asset management alone and require primary legislation. For example, obliging mining extraction companies to have money held in escrow to make sure promised restoration work takes place.
Asset managers must be as sustainable as the companies they invest in: no chasing short-term performance or launching funds with yields set too high.
What I would think is important is that there is a common definition of what integration means, what sustainability means, what inclusion means. For our company for example, integration means that risk-adjusted return of the clients remains a priority.
Room for improvement?
23/25
How can we create more transparency around other items like ESG factors, or their approach to integration of ESG factors or proxy voting? It’s hard to make that transparent.
24/25
We need to agree on some really high-level disclosures around funds so that the industry can be held accountable. Exclusion doesn’t solve climate change; it just means that my portfolio might be a bit better than somebody else’s. Some high-level measures are important, but if you’re successfully prosecuting your strategy, you’ll be able to evidence signs of improvement over time. There will be times when, from an investment point of view, it is right to buy airlines or oil companies, but we want to be constantly improving those oil companies and those airlines. If I’m too frightened to buy something I know to be a good investment, I’m failing my clients. We have to explain what our task is and our task is not necessarily to look good, it’s to be good and be doing good.
25/25
Investment wednesday
The forces that are reshaping asset management are making CEOs look again at strategic priorities, but they are also driving changes in investment processes. It was clear from the strategy discussions that the pandemic and the economic crisis that came with it have accelerated major changes that were already underway. The CIOs are seeing a similar effect on the investment side of the business. ESG has become an unstoppable force. The types of companies that will reward investors are changing. Some sectors will struggle while others flourish – and some new ones may emerge. Against this turbulent backdrop, the CIOs identified key areas of change for their processes and approaches.
action points for Positive themes post-Covid
ESG is becoming central to investment processes but must be done properly. Asset managers must do more to hold companies to account, and be able to demonstrate the impact of their approach.
In a low-growth world, investors have had to look further afield, heading into new areas as they look for opportunities. That will continue but caution must be taken in less liquid areas.
The focus should be on a return to a deep knowledge of companies: you really need to understand the business. Humans still have the upper hand over quantitative methods.
People have lost sight of fundamentals. Fundamentals always matter. However, we’re living through very significant changes so fund managers must remain disciplined while continuing to learn and evolve their investment process.
A lot of traditional fixed income investors will be looking to see where they can earn additional returns. You’ll continue to see increased interest in various forms of credit product. Across credit more generally, we’ll probably be moving into an era where we should see greater dispersion between the winners and the losers. There’ll be certain themes that one can position for structurally as an investor, but generally speaking it should also be an environment that favours active management.
Mark Dowding, BlueBay Asset Management
Central banks around the world are nearing the end of their capabilities. They will try to keep real interest rates negative from here, but we think we’re in the process of a transition where we’re going to end up focusing a lot more on fiscal policy, irrespective of jurisdiction. That changes the dynamic. Everyone is focused on free cash generation right now. We think that remains a good story but, as we look ahead, it’s going to be more about deleverage. Who can generate return that isn’t focused financially in terms of how your balance sheet looks?
Norman Villamin, UBP
There is going to be a lot more focus on ESG. It was hot going into Covid; it’s going to be even hotter coming out. Client demands are changing in this area and we’re going to have to think more about transition companies. We may be going into areas of the market that, traditionally, haven’t been straightforward for ESG-focused investors and investments and thinking about where we can make the biggest change because that is something that’s going to be demanded by clients.
Colin Purdie, Aviva Investors
The social and governance sides of ESG will become really important for companies to operate in the new world. They will need a social licence to do it. Governments have filled the dip with fiscal support and there will be consequences. That social licence to operate will impact behaviours towards employees. Governance puts increasing focus on the asset management industry to really being good stewards of capital. It’s up to us to make sure that we hold companies to account, whether it’s boards or management, that they have appropriate long-term planning in place, that they have appropriate diversity to make sure pay is right, and that shareholders have equal voting rights.
Nigel Bolton, BlackRock
On the investment side of things, a key theme is digitalisation. We already are seeing that from increased spending from corporates who need to support their workers who are working from home. Security is a really big thing. It becomes much more difficult when you’re working outside your offices. In goods and manufacturing, I think companies are rethinking how their supply chains work: moving from just-in-time to just-in-case. A move towards more local production and sourcing is something that we’re hearing managements talking about. The other area is healthcare. We see a lot more spending, both private and public: that’s into the infrastructure and into the equipment side and how that is delivered as well.
01/22
02/22
03/22
04/22
05/22
How the world looks now
Key themes for the future
I’m not sure how many people are really properly doing it in practice. Looking at compensation surveys, people who have ESG analysts pay them a lot less, on average, than they pay credit analysts. That seems wrong to me. If you really want to be serious about ESG, allow active investors to go short as well as long because that gives you both the stick as well as the carrot when it comes to engagement and trying to drive the sorts of outcomes that I think that a lot of investors are looking for. I’m bored with the generic talk around the topic. It’s something that needs to be done, but it needs to be done right.
ESG: time to stop talking and do it properly
06/22
You can generate significant amounts of alpha not only by identifying the best governance versus the worst governance, but by identifying those companies where that governance factor is improving from what had been a bad governance situation. This really speaks to the opportunity in the ESG space broadly: not only identifying the best companies, but identifying those who are improving.
07/22
What’s the starting point with ESG? It’s that you have to say you do it. We need to go beyond that now. We’re at a point in the evolution of this part of the market and the industry where we need to demand those higher standards. There’s a role for the industry to educate clients on this now, as well. We shouldn’t be just taking instruction from a client. We need to be informing the client and guiding them as to where we think we can have the biggest impact, where we think we can deploy capital in the most efficient manner, to engage with companies to ensure that they’re getting better.
08/22
One of the big changes that we’ve noticed over the last six to 12 months is that the US is really accelerating now in its ESG requirements. Previously, it was more of an EMEA thing – and EMEA has set very high standards and continues to push the bar up – but I think now the US is really seeing the benefits of ESG and that’s now helping to push this whole cause forward.
09/22
There aren’t really emerging markets: you have to talk about specific markets and their specific situations, rather than paint them all with the same brush. We think, for example, that the way China has handled the outbreak and stabilised means they are now starting to come out of this cyclically, and part of that will be a transformation of their economy. That is something we very much would like to participate in.
Emerging markets, differentiation within asset classes, winners and losers
10/22
If there’s a hunt for yield, then there’s a playbook for that and you go down the capital structure as much as you can. You try to pick up that yield, you go from investment grade to high yield, you can go into emerging markets. That playbook has changed and I think that’s a positive. We talked about corporates being able to roll over debt either in emerging markets or elsewhere; that automatic rollover should be removed as people look at companies that are going to really suffer from this. This is an alpha market; it’s not a beta market.
11/22
A country like Mexico will probably do all right out of the fact that you’re going to see a new Cold War between the US and China and the fact that the US is going to eliminate China out of a lot of its supply chains. That reshoring of production is going to see more investment come back to North America and I think that Mexico is a relative winner in emerging market terms. By contrast, a country like South Africa, where we continue to see a deterioration in the trajectory, sadly looks to be among the losers.
12/22
It’s important to try to understand and measure the impact that green bonds are having. Companies have admitted freely in the past that their primary motivation for issuing green bonds is reputational. The issuance of green bonds has been put out there as a solution to all the world’s problems. I don’t think they are. The quantum of capital that’s required to beat climate change, for example, is way beyond anything that we can achieve in green bond land. We need mainstream investment. We need it to come from across the piece. So I do have a slight concern that the motivations aren’t necessarily right for the issuance of all green bonds. Some, absolutely; but not all. We’re not measuring incremental benefit properly.
The pros and cons of green bonds
13/22
We should be looking for green corporates and green sovereigns, not green bonds. I’ve seen some green bond issuance where all you’re really doing as an issuer is segmenting some of the proceeds to be green. It makes the rest of the issuance more brown. I’m not really sure that there is much of a net gain in that.
14/22
If you take, for example, a company in the automobile sector issuing a green bond because they want to look into renewable power or electrification research and development: that’s the use of proceeds. What car company in the world is not looking at that anyway? And, if they’re not, would you invest in them? We need to demand more of companies.
15/22
I would argue this is just an example of the maturity of ESG as a concept. It’s not the label any more; it’s what’s under the label. Have you invested in your business to support analysing companies for ESG? Are you doing work around corporate governance? How are you engaging or how are you changing companies? I think it’s really exciting for the asset management industry. It is one of the key things that we need to be doing. I think it’s a great sign of maturity.
16/22
If you take all asset managers, they will say, ‘yes, we integrate’. The question is: can you prove it? Can you show where it has made a difference to an investment outcome? That, for me, is what integration is. It’s not the question at the end of the meeting; it’s not the separate section in a report. It’s the part that says, we would rate this company as positive from an analytical perspective, but because of our ESG screening we are changing our rating. It’s got to be part of that assessment and you’ve got to be able to prove that it is making a difference in your investment outcome.
ESG integration: what is it?
17/22
ESG has to be from the bottom upwards. It has to be the analyst who’s meeting the company to decide whether that’s a good investment or not. It has to be part of the research meeting discussion and the thought process that the fund manager goes through when building their portfolio. To do all of that, you have to have a structure around it. Then you have to monitor it, measure it and review it.
18/22
We certainly think there are real opportunities in distressed credits. You don’t want to be putting illiquid assets into funds with daily liquidity, of course. More generally, in terms of areas of private credit, we have to be cognisant that default rates are going to go up. Central banks are buying assets, but the assets they’re buying are investment-grade-rated corporates and periphery sovereigns and the like. It’s the more stressed parts of the credit market that need the most help – the parts that central banks aren’t going to be buying.
Opportunities in distressed assets – but what price illiquidity?
19/22
There’s an ongoing question: what price illiquidity? What we often find is that in periods such as this, we see the illiquidity premium being eroded away quite quickly. There’s a lot of capital chasing and not necessarily that many good assets. People can sometimes get a little bit overconfident in this area. The expectation of what the illiquidity premium is does not necessarily translate to reality.
20/22
There’s an awful lot of dry powder and cash that’s sitting on the sidelines. The valuation levels are still relatively high, so they’re not going to be the same kinds of returns that you would have got in 2008, 2009 and 2010 vintages. However, I do think they have a part to play in a whole portfolio, but you do need to be very thoughtful about when you need your money back. The name is a warning in itself.
21/22
We’re much more interested in managers who have been through several cycles and who have deep expertise in the illiquid space than following liquid managers into the illiquid space.
22/22
We’re seeing greater changes in the way asset managers are run – and the rate of change is accelerating, so being nimble and responsive is vital.
Cultures must change. Not just how asset managers interact with clients but also how they interact with their own staff – and they need to be able to demonstrate how they’ve changed and what they stand for.
How will the rise of sustainability and the adoption of new technologies change the way you invest? What are the priorities of the CIO right now – and how will they evolve? Those were the questions tackled by this working group of senior investors. Sustainability, an undercurrent that ran through all three days of these sessions, bubbled to the surface in just about every aspect of the discussion. Measurement, whether of the companies they invest in or of their own performances, was also a major theme. Echoing the first of our CIO discussions, the ability to demonstrate the impact the firms are having in terms of sustainability, and changing companies’ behaviour, was highlighted as an area that asset managers would need to focus on. Picking up another overarching theme, the session ended with a heartfelt plea on diversity and inclusion.
The sustainable action plan for CIOs
Standardise data and reporting on sustainability at an individual issuer level, so asset managers can then standardise their metrics for determining if issuers are sustainable or not.
Develop consistent standards across different markets and countries on how we measure the way ESG is used in investment processes.
On diversity and inclusion – ‘always, more, and faster!’
Communicate more effectively to clients about what different managers actually do in terms of sustainable investing and allow them to compare different funds.
Improve collaboration across the industry, not just on data but on engagement too, to initiate change.
Improve portfolio manager and analyst productivity through the smart use of technology.
Engagement has to be at the core of a sound ESG policy when it comes to active analysis and decision-making on investing in companies. The issue of performance and metrics remains challenging: there is not an industry standard for what constitutes a good or bad ESG company. There will be challenges in terms of what is deemed to be a successful or unsuccessful ESG investment. ESG is not so much an investment return opportunity as an investment risk to avoid over the long term and that’s what we’re trying to do.
Julie Dickson, Capital Group
We’re trying to identify issuers or companies that can provide our clients good returns over a long period of time. To do that, they need to have sustainable business models, practices and policies. Implementing best practices across our departments is very important. We realise that it is a journey and, for us, best practice means authentic integration, whereby all analysts and portfolio managers are able to assess the ESG risks within their holdings and ensure that we’re being accurately compensated for them.
Annika Lombardi, Lord Abbett
Best practice in the industry is moving in the direction of having a much more holistic view of risk, rather than the two-dimensional view that has historically been the case. Investment management companies that have successfully embraced sustainability tend to be culturally attuned to it. Our background in Africa means that we’ve had to confront issues relating to biodiversity and social challenges from day one. It’s embedded in our culture and it’s made the transition much more natural.
Philip Saunders, Investec
A company that we didn’t invest in on sustainability grounds was Boohoo, which has hit the news recently. It’s an internet clothing retailing business and the interesting thing about it was that if you took the trouble to work back from the products that they sell to how they’re produced, it was quite clear that they were not taking responsibility for their supply chain. So, for a period, they were a wonderfully successful investment in performance terms, but they had feet of clay in the sense that they’d failed to take responsibility for their supply chain.
My primary focus right now is our climate bond fund. Every single investment within that fund is viewed through a sustainability lens. It has an allocation to green bonds, and there have been multiple instances of passing on securities because we felt that the green bond framework wasn’t legitimate and the business model wasn’t sustainable. For example, there was an issue from an emerging market rail company recently, where they were using the proceeds to buy new locomotives. The rationale was that the locomotives were newer, so perhaps they were more energy-efficient. In reality, it was still almost 100% diesel-fuel-powered.
01/18
02/18
03/18
04/18
05/18
Forces for change: sustainability and engagement
Intelligent sustainability in action: real-life examples
One of the things that we focus on when it comes to identifying companies or just evaluating them in general, is first looking at them from a forward-looking basis. We can’t change what companies have done in the past and what their records will have been. All we can do when we engage with them is to understand what they’re doing to address whatever issues have come up in the past in a way that we believe is both credible and sustainable and can add shareholder value.
06/18
We are very committed to diversity and inclusion across every aspect of what we do. We are committed to understanding companies and how they are engaging with challenges that they might be facing, whether it’s the number of women in executive management, the board diversity, or their employee diversity. It’s really the S, if you will, of ESG.
Is diversity part of sustainability?
07/18
It’s in the S where we’re seeing the greatest progress at the moment although, availability of data – tangible, common-sourced data – is an issue there. We’re originally a South African company; we’ve grown up in the post-apartheid period and empowerment has obviously been a key theme. It’s very much embedded in our culture to take the S seriously.
08/18
Diversity and inclusion, from a firm level and at an investment level, are very important. Diversity of boards, diversity of workforce, and the gender pay gap are all data points that we assess in our investment process, to the extent that they are available. If you say you’ll look at these metrics for the companies you invest in, it also requires you to evaluate whether or not you’re holding yourself to those same standards. That’s a dialogue we have internally quite often.
09/18
You can hire a diverse team, but if everyone on that diverse team does not have the same opportunities for upward mobility – for training, for mentoring – then you’re not creating an inclusive environment where every one of your employees is fully bought in, is fully engaged and feels that they have a long-term career opportunity at that firm.
Defining inclusion – and avoiding groupthink
10/18
I think of diversity as being seen and inclusion as being heard. It’s one thing to be invited to have a seat at the table, it’s another to be an active participant in investment decisions, business decisions, the running of the day-to-day company’s operations or discussions of any kind. We have a motto, which is ‘bring your entire self to work’. It’s something we actively promote throughout the organisation and continue to do so wherever we can.
11/18
Senior management has to be extremely proactive in terms of driving change in the area of inclusivity. Inclusion and diversity are really about being genuinely meritocratic. We aspire to be a meritocratic organisation and we benefit from the ability that we’re able to tap by having a highly meritocratic culture. On the investment side, diversity of thought is critical in the context of active management, in particular because groupthink is our great enemy. It requires a push from the top and this is what the industry was in denial about for many years, but that lesson’s been truly learnt.
12/18
The drive towards a more sustained, structured version of ESG investment will prevail over the next 15-20 years. The active management of human resources and focus on diversity and inclusion is more important than ever. You can’t succeed without having those two frameworks in place. The way technology can help us make better investment decisions continues to evolve. We’re getting more intelligent systems, we’re getting greater access to data and increased transparency because of some of the ESG initiatives happening.
Getting the best out of tech and data
13/18
There’s a plethora of data sources available now and new ones are popping up every day. The actual behind-the-scenes work of validating it – asking ‘is this data relevant?’ and ‘can we correlate it with security performance?’ – that is a huge undertaking that involves technology, quant management and portfolio management. That’s something that’s not spoken about a lot.
14/18
We focus a lot on portfolio manager and analyst productivity. The more you can focus your human analysts on the areas that humans do well, the better the outcome, in my view. Using technology in order to actually achieve that is really important.
15/18
One of the things that exercises us a lot is the difficulty relating to portfolio diversification because of the lack of appropriately priced defensive assets. We’ve been through an extraordinary period whereby inflation and interest rates have come down to extremely low levels and forward returns don’t look that great, particularly in conventional defensive asset classes, but potentially more generally. Therefore, if the returns to beat are going to be less, then that is going to be a big challenge. The active managers who rise to that challenge are going to be an advantage. Passive investing is going to struggle against that background.
Investment challenges
16/18
At least in the developed world, interest rates have come down dramatically, especially in fixed income. Yields are very low, if not negative in some cases. You have a number of companies across different industries who, from a regulatory perspective, are not able to pay dividends. If you look at which companies are paying dividends, it’s tobacco companies. In an era where we are driving more towards ESG investing and where dividend income, in particular, is becoming more and more scarce, how do you marry those two things?
17/18
Investors tend to rely on historical data to make decisions based on where we think valuations will be in the future. There has been such a distortion in the market due to government intervention. The European Central Bank owns over 20% of the eligible bond market. That’s created a completely different dynamic that requires a new lens with how to view the future. The market dynamics are making it difficult to predict where total returns will come from in the future.
18/18
business thursday
To be truly global in the world of asset management, there is no room for cutting corners. The participants in this session agreed that efficiencies must be found through data in scaling up business, but maintaining important partnerships with distributors is also critical. Finding the right partners was identified as a key point. Forming meaningful relationships with the largest financial institutions is almost impossible, but equally not all smaller institutions will be around in five years’ time. It is impossible to look at how businesses will change in the future without considering the impact of technology. Some changes that have been induced by the pandemic are here to stay. At the same time, firms that lose sight of the importance of human interaction will suffer. If your only interaction with clients is via a video conference, fatigue will soon set in.
action points for Distribution, service and technology
You need the entire package – share classes, currencies and services. Performance alone is not enough.
The global private banks are not everything. Query whether you can ever be a true partner. Opportunities exist in tier two for meaningful partnerships.
Greater collaboration between internal asset management teams around the world is vital, as is making marketing central in the organisation to ensure consistency of message and approach to client relationships.
Marketing and data will become more and more sophisticated, allowing asset management groups to scale through use of targeted, relevant and timely data.
Partnership is important, but you cannot have too many – perhaps 10 to 20 in each region.
No more lone-wolf or hero salespeople. The industry will become more collaborative.
We need good performance, but we also need good transparency. We need share classes in the wide range of currencies, income, various distributing intervals. The asset managers that win are those that can serve us as effectively in Europe as in Asia or the Middle East, and that’s critical for us. No longer is it just about delivering the performance as a winning strategy for a fund. Clearly, that’s important, but you have to have the entire package.
Omar Gadsby, Credit Suisse
The challenge is how can you operate at that high level while also building a partnership with your distributors. You have to be big enough to have the global reach and have all the marketing stuff that goes with it, but you also have to work out how you can build a partnership with your distributors. Everything has shifted and we cannot go back to the way we were. We have to define how we build that relationship with our clients differently.
Richard Garland, Ninety One
Finding efficient ways to scale is critical. You can only have so many boots on the ground. Scale is going to be found through efficient means, such as tech. We need to use the data that we’re all accruing as our clients interact with us, not just in direct conversations, but in the digital realm, to create experiences for them that feel authentic and credible, and that feel like we’re meeting them where they are, even if that’s in the virtual space.
Vince Grogan, Lord Abbett
It’s not just about having the right marketing, sales and client service associates in the right locations. What’s more important than that is that they are joined up and coordinated in their approach to global clients.
Grant Leon, Capital Group
There are capabilities yet to come that are going to make it more dynamic to be engaged in virtual events. As those new capabilities come online, as we get towards a place where integrated technologies allow for more dynamic presentation, there will be instances when people will be able to say, ‘actually, I’d like to see you present that to my entire investment committee’. We’re doing it over these remote channels, which is going to make it more efficient and, in some cases, more engaging.
01/16
02/16
03/16
04/16
05/16
The need to be global: The complete package
We are never going back
We’re never going back to the way it was before.
06/16
That relationship between marketing and sales is essential, and in this world of Covid, I believe that marketing is even more important than it’s ever been and it’s not just about sales. The role of a salesperson has to be evaluated because it has to be driven from the centre, with marketing. The only way you can coordinate that is centrally, through marketing.
Making marketing central
07/16
If marketing is focused exclusively on branding and visibility and disconnected from the commercial endeavour, that’s where you get that disconnect between sales and marketing. Ultimately, sales have to feel that what marketing is doing is relevant to the commercial effort, that it’s helping them and it’s enabling them. That’s a big part of our conversation with our sales team right now: enablement.
08/16
We’re laser-focused on partnerships with those organisations with whom we can build a partnership because we believe they are going to be around in a few years’ time. We are not talking about hundreds of clients; it’s 10 to 20. When you look at it, in each of the 11 markets we operate in, the top 10 or 20 clients represent 90% of the market opportunity, and then you have to ensure that each of those clients has longevity.
Finding partners
09/16
The word ‘partnership’ is used too glibly. If I look at the major global financial institutions, it’s not a two-way arrangement. Can you really be a true partner with one of the largest global financial institutions? I’d like to push back on only focusing on the really big players, because I believe that you can build true partnerships to firms that are just beneath the top tier because they really want you to be a partner. Distributors – big global financial institutions – are using more passive funds. They are also bringing some of the stuff in-house. You’ve got to work really hard to be a true partner now.
10/16
Our ability to personalise, customise and be more agile in responding to clients’ needs is increasing. Our access and ability to manipulate, organise and display data is only going to get faster. So on some levels, the quality of what we’re able to deliver and the ability and ease with which we can deliver it is going to improve. That means it’s going to be available to just about everyone, but that doesn’t necessarily mean democratisation. True partnership is going to require that human element and relationships at all levels of the organisation. Technology is the means to being able to provide these things to clients that they demand. If you’re not making those investments, then you’re going to end up being culled as the number of relationships narrows, due to necessity.
Selling and salespeople
11/16
Marketing coordination is absolutely key. You will be in a world where there will be fewer salespeople, and that is a big shift. The cult of the lone wolf salesman is gone. It’s going to be all about people working in teams, being collaborative and rowing together with marketing. That means that certain types of people will no longer be able to work in asset management. I cannot stress enough that marketing has to be in complete partnership with sales. It’s not so much the qualifications – it’s the mindset. It’s the mindset of being part of a team, making sure you’re on message and working in line with the overall direction of the firm.
12/16
The marketers aren’t going to become experts in products, or in what the platforms and the fund selectors require or demand. So, for us, sales is a validation point. It’s both an input for us and a source of ideas: a place where we can understand what the needs of the clients are. It’s also a means for us to validate the things we’re delivering, because the moment those things become disconnected, that’s where it feels like the use of data and technology is taking the client for granted.
13/16
How are you working together locally as a team? How are you working with the marketing team? How are you working cross-border? Are you inputting the right information into salesforce.com around the client interactions? Are you recording the sales pipeline in a timely manner? All of those sorts of things are very important and, for us, are key performance indicators for a salesperson.
14/16
The challenge is how do you stand apart as a fund manager? Because if everybody is using the same tools, the same video conferencing, it becomes difficult to be different from your competitors.
Differentiation
15/16
The experience in this virtual space cannot remain static. The fatigue is real, the challenge of everyone staring at each other on a computer screen; we have to find ways to make that more dynamic, making it possible for salespeople to bring data into that experience. Not just by sharing experiences, but more dynamic ways to allow them to customise that information on the fly. How this experience evolves is going to go a long way in helping people differentiate themselves in the eyes of their clients.
16/16
Sustainability applies to clients – or partners – too. You want to partner with those who will still be around in 10 years’ time.
Technology was the focus of this session but you could just as easily say it was about service, as the two topics are inextricably linked. There was a real sense that Covid-19, and the changes in working patterns and practices it has brought about, will accelerate many overdue changes in the way asset managers and clients interact. Echoing the views expressed in all our World of Asset Management sessions, sustainability and diversity were again picked out as topics that must stay front and centre in asset managers’ thinking.
action points for Working and winning with technology
The old distinctions between sales and marketing are gone. The two must work hand-in-glove to create the best possible overall client experience.
Understanding the client is vital and tech can take asset managers to a new level – but investment in technology is vital. Asset management is way behind other industries in using data to enhance client service.
Clients have been quick to embrace the idea of virtual meetings, but this will permanently change the way we work. There will be no going back to the old ways of interacting, so asset managers must be inventive to maintain some face-to-face element.
The enhanced service levels that clients have experienced during the current crisis have permanently raised the bar for asset managers.
Sustainability and diversity are inescapable essentials.
When crises hit, people have to start thinking about new ways of engaging and people tend to go on overdrive. This industry has been a prime example of that, but bombarding is not the way forward. If you know your client and you’ve datamined and you can use that in your marketing, then they will not end up with us on too many lists. If you haven’t invested in technology to allow your client to come into what used to be a very protected world, you’re missing a trick.
TJ Voskamp, Aviva Investors
I’d love to say that we are at the forefront of datamining all this information about our clients, but this is fairly new to us. Even the most rudimentary online retail platform is probably far ahead of the average asset manager. There is no doubt that we need to get better about figuring out exactly what resonates with clients and delivering it in a way that they can digest it.
Jared Murphy, BlackRock
Prior to March, digital and virtual was not our preferred means of communicating with our clients. Once clients started to get into a rhythm of this new form of communication, their sensitivities went up pretty dramatically when you provided them with information that wasn’t relevant to them.
You need to categorise the information you gather versus the different type of personalities there are and try to understand within each of the categories what they want to have. One of the interesting outcomes of the pandemic is that the clients have embraced technology much more than in the past because, ultimately, they didn’t have a choice.
Luc Leclercq, BlueBay Asset Management
With all that data that we have, we’d like clients to come into that themselves and extract what they need from us.
01/20
02/20
03/20
04/20
05/20
More than ever, you need to know your client
People want to look in your eyes still and they want to see the portfolio manager, in particular, face to face. So we’re going to have to find a balance. Once this terrible crisis with Covid is gone, or at least managed, then we can start finding balance of seeing people face to face and giving relevant content online.
How virtual meetings will change us
06/20
Our issue is not with the relationships we have with our existing clients, our issues are predominantly with establishing new relationships with clients. Historically, this has been done in a face-to-face manner in this industry. How do you reach out and establish a connection with somebody that you’ve only met over a video screen? I miss those breakthroughs that you would have in client meetings when the clients are popping in with questions unexpectedly from different sides of the table. I’m not sure how we get that back through a digital interface.
07/20
The newer generation are used to using much more technology and non-face-to-face type of meetings. That might be a change that we have to adapt to. We can be much more productive on both sides once we are doing DDQs, ODDs and all those types of things because we can do everything online and everybody can be much more interactive.
08/20
A client experience team should work effectively in parallel with me and the marketing team. The three of us decide the client journey. There’s a pre-point of sale, there’s a point and then there’s a post event. You need all three parties to work together to help make that journey as pleasant, professional and watertight as possible. I want my salespeople to be strategic advisers to their clients, not product pushy.
Sales versus marketing: has the dynamic changed?
09/20
It should not be easier for me to order toothpaste or pick a TV show than to find out information on a product that I have $50m invested in. I don’t think, historically, investment has been made on the technology side, with personalised portals for clients. We have not made the investment in that type of technology to date, but make no mistake, that’s obviously where our focus is now that the world has changed.
Why – and how – we must invest more in tech
10/20
We need to do much better and the Netflix approach is definitely one of the things that we should take into consideration. Having said that, if Netflix gives me the wrong film, I might get upset; if I give a client the wrong fund, I have a different issue. Clients are embracing technology more and more. The question is, how much face-to-face do they want? If I go to Amazon, I don’t need an Amazon salesperson in front of me; I can just click what I want. I’m not saying that this is the case for everything, but if I’m buying a unsophisticated fund, why can’t I do it online?
11/20
With a more digital interaction with our clients, our sales teams need a better story. You’re not there to sell a product or a single strategy any more, you’re there being that adviser to your client and hence, we’ve created those channels, with expert salespeople.
How to build true partnerships
12/20
I would love nothing more than to wake up in the morning and have a data feed that pulls relevant headlines across the industry, cross-references it with clients’ needs and interests and tells me what communication I need to do in that next hour and what form to do it in; ideally, if it’s electronic, it’s already teed it up for me. That probably feels like second nature to a company like Amazon, but in the asset management space it feels miles away.
13/20
The competition is out there snapping at our heels and investing in technology. It is critical that you can respond to that change because we all know clients are now used to this fantastic service that is getting better by the day. They want to see it develop even further. So investing in your client experience is critical.
14/20
Once you deliver something in 24 hours you can’t go back, that’s for sure. The question is then, how far will it go? It is like a journey and we need to continue to find out what the clients want. The technology demands of the client might change dramatically in the next three, four months.
The bar has been raised
15/20
The speed and transparency with which we have delivered over the last three and a half months will be an expectation. I’d like to think that organisations are adjusting to be able to deliver that expectation. I don’t believe we’ll ever revert fully back to the manner of interacting with clients that we had prior to this pandemic, so I do believe that some level of digital technology or virtual interface will become, in many cases, the norm.
16/20
In the old days, it was ‘look at this fantastic salesperson looking after UBS in this region or looking after Credit Suisse or looking after X, Y, Z’. Now, the team, because they’re becoming more local, have to communicate more effectively and efficiently together to attack these larger complex clients. We’re all looking at the ESG element here as well. Clearly, environmentally and socially, we all need to learn to adapt to this new working-from-home or mixed working-home-office world. How people live their work-life balance is changing.
17/20
The complexity of the client means they don’t like the lone wolf; they don’t want the fast salesman anymore. They want to see you at the start, know your client and the personas within those organisations. They want to work with salespeople that understand the whole organisation, that bring the relevant people in from the top who can talk on behalf of the whole firm on a technical level, not just a quick sale.
The lone wolf has gone; diversity and sustainability are here to stay
18/20
Throughout my career, I’ve always worked with different nationalities, different genders, different races, and that’s really important. It’s understanding the culture. The diversity of your workforce gives you such an edge because you need to think differently constantly. It’s a good challenge to have people with different backgrounds.
19/20
Unquestionably, diversity and inclusion have become more important to our organisation; it’s become more important to all of our client organisations. We are seeing it regularly now, in all of the RFPs and due diligence questionnaires that we see. A year ago, it was a rarity and now it’s commonplace. If you’re not making a proactive effort to build and sustain a diverse workforce, you’re not going to be relevant in this industry in five years.
20/20
I think this industry is starting to really put the client first and starting to think client-centric, which it probably hasn’t had the best track record in.
21/21
