Fund Forum: DEAM chief calls for manager rethink
NICE - Deutsche Asset Management chief executive Paul Manduca says that investment managers must be allowed ‘back in the room’, if institutional clients want to see improvements in their asset allocation strategy.
Speaking at the Fund Forum discussion session in Nice entitled “What value has the investment management industry delivered?” Manduca rejected the recent KPMG/Create report which suggested that the industry was in crisis.
But he acknowledged that the ‘contrition’ being expressed by some in the industry is ‘appropriate’: “The industry does feel bad about what has happened, but this only really applies to equity funds. There has been nothing said about the solid returns from bond portfolios.”
On the issue of whether the funds industry needs to be more accountable, some CEOs on the panel, such as F&C’s Bob Jenkins, suggested that the industry does not need to apologise for anything. Jenkins says the problem lies in the poor understanding of the risks of equity investment over shorter periods.
The panel agreed that the problem is at the asset allocation level. Manduca in particular suggested that if the situation were to change, fund managers would have to be more closely involved with trustees: “We want trustees to accept that we need to be back in the room. The consultants have succeeded in keeping us out. But for improvements in asset allocation to be achieved, we need to be in the room.
Allianz Dresdner chief executive Joachim Faber agrees: “The asset manager has to be involved where asset allocation strategy is being changed. I think, given their professional capabilities, they would be better placed to help achieve this than the sponsoring committees or the consultants.”
Gerrit Russelman, investment director at Dutch healthcare fund PGGM says: “My observation is that the industry has gone too far down the road of creating many specific benchmarks. Where the market characteristics change, the fund manager cannot change its attitude because it will be accused of style drift. At PGGM , if circumstances change we can change the style bias. We have the ability to do this, but perhaps others do not have such a flexibility.”