SPAIN – A brand name is not enough to guarantee asset manager performance – it’s people that count – says Watson Wyatt’s European investment consulting head Kevin Carter.
“A brand name for brand name’s sake is not a sufficient condition to obtain outperformance,” Carter told the World Cup of Investment Management in Barcelona today.
There were several factors that marked out the ability of firms to attract and retain talent, Carter told delegates.
These included the leadership in control of its own destiny, a stable corporate structure, the management of asset growth and the alignment of client-manager interests.
Carter said that these typically are not likely to be found in the large firms and certainly not in the large unitary ones. The kind of firm that does deliver these things needs to be more aligned with the client’s interests
“These are usually niche firms,” he said. But he noted that just having a niche firm does not guarantee performance.
“But if you do want performance you may need a niche firm constructed in such a way that helps you deliver it.”
Employee ownership and commitment are typically regarded as being supportive of fund performance as is having a smaller number of clients. Another factor he referred to was being more willing to adopt fixed fees and performance fees.
The traditional argument in favour of large firms – size of assets, higher IT spend, distribution power and in-house synergies - were no longer valid.
“You should ignore brands for brand’s sake when picking an investment manager,” he reiterated. There are some areas where brand would be of advantage, he said, referring to liability matching, passive investment and enhanced indexing where size actually helped.
As to what firms would attract talented people in the future he though the boutique model would be the winner but some boutiques could be within larger firms he pointed out.
“The best firms will be those with the best people.”