the senate group an introduction to met premium partners (27.6.2014)
TRANSCRIPT
1
Kevin HintonHead: Distribution and Client Services
27 June 2014
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Agenda
1. Trends in the asset management industry and role of the
‘smaller/boutique’ investment manager in portfolio construction
2. Introducing our partners and their unique value proposition
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Bifurcation – “Cheap” Beta and “Hunt for Alpha”
Revenue margins2005 Size ($x T)
Below averagegrowth
Aboveaveragegrowth
Source: National statistics, BCG analysis, Morgan Stanley Research. Projections 2005-2010.
10bp 30bp 40bp 50bp 100bp 200bp20bp
Index funds4.7
Active bonds13.2
Active equities16.2
Structuredproducts0.6
Quantitativeproducts0.4
Private Equity1.5
Hedge Funds1.2
Innovative productsTraditionalproducts
Market Tracking
Money Market6.7
B C
Real estate1.3ETF
0.3
A
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Active managers becoming a scarce breed
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The asset management barbell
Polarisation of cheap beta and difficult/expensive alpha
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Background to the rise of boutiques
• Significant growth in global AUM of the asset management industry
• Regulations such as the Dodd-Frank Act – traders spun out of banks
• Top performers at large investment managers want more freedom to
implement their ideas
• Growing sophistication in investor base
• Expertise within niche markets
• According to David Swenson (ex CIO of Yale University endowment) –
“Owner operators simply work harder and better than rank-and-file
employees and that small, independent, entrepreneurial organisations
provide greater alignment of interest between firm and client.”
7 met collective investmentsSource: Sungard Asset Arena 360
Boutique Definition Heatmap (by region)
Entrepreneuralism Niche Focus Investment Team Ownership Small Staff Less than $10b
AUMSpecialised Products
US
Europe
Asia Pacific
Latin & South America
Middle East & Africa
Canada
All
Bright green indicates most popular term. Orange represent least popular term. Colour determined by popularity within each region
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Rise of boutiques… the global experience
Source: Lipper, a Thompson Reuter Company (Legend indicates size of funds)
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The rise of SA boutiques, growing in line with CIS equity trends and capturing even greater proportion
Mar-99
Mar-00
Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
20
40
60
80
100
120
140
160
180
200
Total no. of large institutional managers No. of boutiquesTotal no. of funds
% o
f in
ve
stm
en
t m
an
ag
er
un
ive
rse
Nu
mb
er
o f
un
ds
Source: ASISA statistics for SA collective investment schemes
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The value proposition of boutiques over larger, institutional peers
Mar
-07
Jun-
07
Sep-0
7
Dec-0
7
Mar
-08
Jun-
08
Sep-0
8
Dec-0
8
Mar
-09
Jun-
09
Sep-0
9
Dec-0
9
Mar
-10
Jun-
10
Sep-1
0
Dec-1
0
Mar
-11
Jun-
11
Sep-1
1
Dec-1
1
Mar
-12
Jun-
12
Sep-1
2
Dec-1
2
Mar
-13
Jun-
13
Sep-1
3
Dec-1
3
Mar
-14
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
Rolling 3 years excess returns of SA General Equity Funds (net of fees)
Average Bank, life assurer owned Average Boutique managersLarge Institutional Managers
Source: Morningstar data & Momentum Manager of Managers research
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Median rolling yearly excess returns of Australian equity managers
Institutional Boutique
Source: Russell Investments. Past performance is not a guide to future performance
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Key factors behind the global boutique boom
Other
Investor distrust of larger firms
Uniqueness of investment research
Investors looking for diversification
Agility
Client service
Focus on one investment strategy
Active management vs benchmark tracking
Pure and simple - performance
Talent
0% 10% 20% 30% 40% 50% 60% 70% 80%
2%
19%
20%
22%
45%
52%
61%
63%
66%
76%
Source: Sungard Asset Arena 360 industry report: THE GROWTH OF INVESTMENT BOUTIQUES: David versus Goliath (2012)
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Boutique characteristics in South Africa
Type Description Example
Independent Group as a stand-alone firm
Part of large firmAcquired by larger investment managers
Multi-boutique / best of breed
• Collection of boutiques
• Own investment procedures and brands
Own brand
Brand of the manco
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Global practicesWells Fargo Investment Management
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Global practicesNew York Life
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Imqubator seeding new investment managers
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Levers by asset management business modelsVALUE PROPOSITION
ORGANISATIONAL MODEL KEY LEVERS
1 α HUNTERS (Multi-)boutiques Ability to manage complexity Specialised investment expertise
2 TRUSTED ADVISORS
Partnerships of advisors
Independence Client understanding
3 β GAZERSLarge independent investment managers
Branding power Economies of scale
4 DEMAND EXPERTS
Asset management units of banks/insurers
Group brand and distribution channels
Product innovation
Source: Roland Berger Strategy Consultants
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Introducing the MET Premium PartnersTM concept
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MET Premium PartnersTM objective
Help develop the advisory and investment management industry in South Africa through skilled advice, efficient administration and meaningful distribution – in a cost-effective way
But it’s about quality and not quantity
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Our objective
• We aim to position and promote “Growing Tomorrow’s Leaders
TodayTM” and “MET Premium PartnersTM” within the broader retail
financial services industry
• We align with and seek partners that:
• We have identified as offering quality investment management skills
• That have specific skills in areas that we want to complement our
“Premium Partners” and universe composition across different strategies
and styles
• Have a high degree of management independence and want to retain their
own brand
• Have undergone rigorous research by Momentum Manager of Managers
and have therefore received our stamp of approval
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How MET Collective Investments is supporting boutiques
• Increased visibility and scale
• Fund administration and compliance via the MetCI licence
• Letting good investment managers concentrate on managing alpha
• Backing of MMI’s balance sheet
• e-Commerce strategies
• ‘Core’ pricing on the Momentum Wealth Platform
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Managers undergo vigorous research by Momentum Manager of Managers
Assets under management R318 billion (>R500bn group assets)
Staff 170
Investment team 23 (+ 14 London office)
Years in manager research 19
Years in multi-manager investments 19
Investment portfolios 200+
Parent company (MMI Group) AA Fitch rated
Measure Our numbers
Manager of Managers of the year 2013
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MET Premium Partners TM
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Diverse investment opportunities for growth investing
Category Partners
Active equity
Value
Quality Spe
cial
ist
stra
tegi
es
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Diverse investment opportunitiesS
peci
alis
t st
rate
gies
Category Partners
Passive/Smart beta
Category Partners
Property
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Diverse investment opportunities for retirement planning
Category Partners
Balanced
Flexible asset
allocation
High equity
Medium equity
Low equity
Income
Spe
cial
ist
stra
tegi
es
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Diverse investment opportunities
Category Partners
Income
Flexible
Bonds
Money market
Spe
cial
ist
stra
tegi
es
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Key
ben
efits
to fi
nanc
ial a
dvis
ors
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If your investment boutique were a car, which one would it be?
Car Representation
Solid track record
Mid-market consistency supported by quality engineering
Stable returns
High performance in a well-defined niche
Provides protection and performance in tough markets
Focus on green credentials and sustainability
Old school investment manager for old money
Good value for a standard product
Source: Sungard Asset Arena 360
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Web-app (PC, iPad and android)
• Manager information (fund fact sheets)
• Manager research (Momentum Manager of Managers)
• Thought leadership articles
• Community gateway
• Forms
• podcasts
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Thank you
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Disclaimer
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How boutiques define boutiques
Entrepreneurialism
Niche focus
Small staff (>100 FTEs)
Investment Team Ownerhsip
Focus on Core Competency
Manageable AUM (>$10b)
Highly Specialised Products
0% 10% 20% 30% 40% 50% 60%
53%
52%
48%
47%
42%
33%
31%
Source: Sungard Asset Arena 360
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The rise and rise of boutique investment managersAustralian experience
Source: Russell Investments