‘What makes us different is our independence.’ I’ve lost count of the number of asset-management firms that have told me that. Which rather disproves their point.
When it comes to differentiating a business, independence is a means, not an end. And its contribution is more about a sense of autonomy and self-determination than the absolute facts of who owns whom. As the psychologist Erich Fromm almost said, we only truly feel free if we’re in a box – but we need to believe we have had a say in defining the boundaries of the box and with whom we share it.
Deutsche AM is preparing to go public, and there is much it can be positive about, even though it will likely remain largely under Deutsche Bank ownership. I say that, because some of the more dramatic recent movements in the rankings of top asset-management brands in Europe can be linked to a sense of independence.
As the latest annual brand report from Fund Buyer Focus (FB50 2017) notes, the ‘barbell myth of blockbuster and boutique’ predicated on economies of scale and constraints of cost and regulation, is looking a little dated. Mid-sized providers that differentiate themselves between the extremes of ‘expert small specialist’ and ‘too-big-to-fail bulge-bracket firm’ have shifted strongly up the rankings again this year.
At the sharp end, Nordea has moved 14 places into 8th, building on a steady rise from 32nd in 2014. Whilst product has been key (the Stable Return Fund has been flying off the shelves), there’s also a strong consistency to what Nordea offers and delivers. The firm is built around stability. There is a clear ‘cause’ in what Nordea sets out to do and it pursues it relentlessly. It makes Nordea different.
But what’s that got to do with independence? Well, the firm’s view is that, ‘investment managers will perform better if they are autonomous and independent’, and maybe the sense of independence was bolstered indirectly in 2013 when Sweden’s Government sold off its remaining stake in the fund arm’s parent, Nordea Bank. Arguably, their sense of independence gives Nordea’s people the autonomy to behave true to their beliefs and to a cause that appeals.
Nearer the other end of the top-50 table is an even bigger riser in 2016, moving 15 places to 34th. In February 2014, Dexia AM was renamed on its sale to New York Life – and CANDRIAM (Conviction and Responsibility in Asset Management) was born. Accordingly, SRI became the firm’s entire focus and in the ensuing three years, progress has been rapid.
Whilst independence is perhaps a more obvious element in this story, it is the way it has been harnessed that really impresses – like Nordea, CANDRIAM has a cause that engages internally and externally, and that is engrained in the character and expertise of the firm: ‘these two values [conviction and responsibility] drive everything we do. They are the roots of our expertise, our innovative ideas and a great discipline in our investment process,’ says CEO Naïm Abou-Jaoudé. But arguably it was Abou-Jaoudé’s recognition of ‘this new energy’ – the sense of autonomy – that independence brought, which proved the catalyst to CANDRIAM’s new reason for being and success.
Robeco’s steady rise up the rankings from 22nd in 2012 to 10th in 2016 is also a story of independence facilitating success. The sale to ORIX in 2013 can be seen as a new beginning for the formerly Rabobank-owned group that allowed the firm to more fully express its character as ‘cautious pioneers.’ Again, Robeco has a distinctive purpose that attracts and engages both within and without.
So, perhaps asset managers shouldn’t just be looking to justify a change of ownership on cost savings, scaling up, and diversification, on the one hand, or down-sizing, specialist expertise, and a niche positioning, on the other. Galvanising employees and clients through a common cause is also important and gives the otherwise ‘squeezed middle’ of providers a basis for enduring differentiation. As a ‘millennial’ respondent to a professional-services firm’s recent HR survey put it, ‘What we are craving is courage and substance, we’re craving organisations that have emotion, organisations that have character, organisations that don’t try to be all things to all people.’
But where does that leave the more ‘blockbuster’ Deutsche AM as it prepares for the unknowns of an IPO that will ease the grip of a troubled parent? If its leaders can identify common purpose in the business and harness the energy released by a change of ownership structure, the IPO could yet be a great opportunity for all concerned.