The multi-affiliate model – a case study

0

by Greg Bright

Martin Currie Investment Management, the Edinburgh-based global equities firm owned by Legg Mason, the big Baltimore-based multi-affiliate manager, has appointed a new global head of ‘distribution and strategy’. The move highlights the nuances in a funds management model increasingly seen as the way of the future.

Julian Ide joined Martin Currie late last month and was in Melbourne and Sydney last week meeting with clients and colleagues. One of those colleagues was Andy Sowerby, the Australasian chief executive of Legg Mason, who had previously held Ide’s position in Edinburgh. Sowerby hit the ground running in Melbourne for Legg Mason in 2016, introducing new strategies and products to this market for the nine-affiliate firm and opening a Sydney office as well as new markets in the listed space.

Sowerby said of Ide’s appointment, after a two-year hiatus: “I have no doubt Julian will be a great addition to Martin Currie at a time when they are enjoying strong growth, driven by key strategies such as Australian and emerging market equities. It has been worth taking the time to attract someone of his calibre to the team.”

It is true, the role had been vacant for two years. But it’s also true that the appointment of a head of sales and marketing for an affiliate in that sort of funds management firm – and there are an increasing number of them in Australia and around the world – is a crucial role. It requires a range of skills, especially diplomacy, to maximise the twin benefits of independence for the investment managers and scale for administration and distribution reach.

Ide’s pedigree working in a longish list of big funds management firms includes the role of chief executive of Old Mutual Global Investors. Importantly, Ides was actually hired by the business when it was known as United Asset Management (UAM) which was acquired by Old Mutual. And UAM’s founder, Norton Reamer, was the godfather of the multi-affiliate model, starting in the 1980s.

At one time, UAM owned 50 affiliated managers. But it fell on hard times for various reasons, one of which was that it tied its investment managers up for 10 years, after buying all or most of their businesses, and failed to have a proper succession process in place. After 10 years, they tended to leave and their clients subsequently tended to leave too.

Ide said in Sydney last week that, with Legg Mason, Martin Currie was providing its high-quality institutional capability to the wholesale part of the industry (financial planners). “That’s the power of the multi-affiliate model,” he said.

At Old Mutual Global Investors (OMGI), from 2011 to 2015, Ide set himself an aggressive growth target, which he achieved through a range of initiatives and, importantly, a change in the whole culture of the firm. Ide is big on culture and if any funds management company requires an appropriate culture it’s one which fits within a multi-affiliate group.

“Culture is everything,” Ide said in an interview in Sydney. “And multi-boutique structures are, in principle, the best way to run active funds management strategies. I believe fund managers shouldn’t be confined to a house style. They shouldn’t be constrained. The moment you tell them what they should buy or sell changes the nature of the relationship because the fund [portfolio]manager loses control.”

He thinks that culture is important “value wise, motivation wise and intelligence wise”. He believes that Martin Currie already has the right culture and “in some ways it is a boutique of boutiques”. At Martin Currie, the various strategy teams, such as emerging markets or global long-only, for instance, have greater independence in their investment decision-making than they would have in a lot of other big firms.

At OMGI Ide did several big and several small things. Oddly, a couple of the small things, he believes, provided big benefits. He introduced a dress-down policy, which expanded “mufti Friday” to the whole week. He also introduced an intern program to allow greater diversity in the backgrounds of new younger people coming through.

“Just wearing jeans instead of a suit is indicative of an open-mindedness and, possibly, a new way of thinking… I wanted new people to come in and help change us. I wanted to change the way we made decisions and the quality of those decisions… OMGI was focused on the old world and that had to change.”

One of the success stories of the intern program, he says, was a person who did not have a university degree, which is rare in funds management, and was from the “wrong side of the tracks” – not your normal private-school-educated employee in the City. “I think he is the only one still there,” Ide says.

The big things were to make the product range more diversified and to “reconfigure” the sales team. Basically, several team members were replaced. Ide says, though, this was more to do with their values which would allow them to be empowered. Some people are not suited to that.

“I think that a leadership role is more to support people rather than direct them,” he says. “We facilitate the business outcomes. Some people don’t want to take on that level of responsibility.”

He also likes the concept of ‘equality’ in a business, whatever a person’s age. This requires respect where everyone knows each other’s role and respects that role and that person. “It’s amazing how much more people can achieve when they enjoy what they are doing.”

Similarly, the relationship between the owner or big shareholder in a multi-affiliate shop and the actual fund managers is crucial to their combined success. The institutional shareholder has to act in all circumstances the way Ide believes all bosses should act: providing support and guidance; not ‘telling’ people what they should do. That’s a cultural thing as well.

Martin Currie’s head of Pan Asia business, based in Melbourne, Kimon Kouryialas, who now reports to Ide, said that what a multi-affiliate model allowed the actual fund managers to do was to concentrate on what they did best – invest money for clients.

“We are really good at investing in international equities, including emerging markets, and Australian equities,” he said. “We are able to retain our close direct relationships with big investors, such as super funds, and at the same time we are able to offer our strategies to a broader [wholesale/retail] market through Legg Mason.”

He agreed with his new boss, saying that the relationship between the affiliate and its ultimate owner was very important to enable both to prosper: “As Julian says: it all comes down to culture,” Kouryialas said.

Share.