Positioning a relatively new investment company is not always an easy feat when the world is stuffed full of boutiques and behemoths of all hues and everything in between.
Pioneer Investments is not exactly new, having developed internationally at the beginning of this decade from the Boston mutual funds grandee, but it is still new enough in Europe that the positioning of the firm is an important part of senior management's thinking.
Paul Price, global head of business development for Pioneer Investments, is in equal measures enthused his firm's prospects and angry at the investment industry's lack of focus on the end client.
Part of his vision is to re-engage with both investors and consultants in order to help re-establish asset managers, and of course Pioneer in particular, as a trusted party and not a short-term sales and performance-driven money making machine.
"We need to get engaged and feel we are part of the long-term solution of the industry rather than being part of a herd of product pushers," Price says. "When I started out we used to be engaging with the consultants, talking about active management, core-satellite approaches and that was generated by a dialogue between consultants and subsequently engaging the clients in that thought process. I think that served the clients extremely well."
The acquisition of HVB by Unicredit and the subsequent integration of its Activest asset management subsidiary in 2006 has given Pioneer a significant institutional and retail presence in Germany. And for reasons of parentage it is the largest institutional asset manager in Italy. Currently the firm finds itself in a phase of geographical expansion.
Pioneer entered the Nordic market in August with the hire of Mats Langensjö, formerly at Aon Consulting and Wassum. A Russian venture was announced in October, with the hire of Elena Loginova to head a local subsidiary. And last autumn the firm appointed Jillert Blom as institutional sales manager for the Netherlands. Aside from mutual fund distribution, Pioneer will also target the Dutch institutional market. Further afield, the group has entered into an asset management joint venture in India and has established a representative office in Bahrain.
Hitherto, however, Pioneer has not been big in the UK institutional business. And that is something that Price and his colleagues have an ambition to change. Griff Williams was hired in 2006 from the UK's Railpen, the investment operation of the railways pension scheme, as institutional strategist. And a key plank of the strategy in the UK will be a diversified growth fund - the type of LIBOR plus, multi alpha source fund that many UK investment houses have recently launched or are currently road testing.
"Given the amount of alpha sources we have internally, the fact that we run our own multi manager division internally as well, and the fact that we can take the alpha sources from other places and port it, we are very comfortable that we actually can do this. So we have come out with a diversified fund," says Price. "We could have launched one eight-nine months ago with the characteristics and criteria that we have today but we didn't do that, we road tested [the fund]." The launch, he adds, is likely to be in the first quarter of next year.
One of the key challenges, says Price, is ensuring that the alpha sources within such a fund are uncorrelated in reality as well as in theory: "This requires careful analysis of correlations. Our remit is to find best of breed alpha sources and you won't see us putting every single product of Pioneer in because for sure we are not good at every product we do. But the reality is that we are good in some and world class in others."
The multi-asset portfolio management team, headed by Mateo Germano, has identified around 28 alpha sources for the fund, of which about half of which are managed by external parties. The division manages over €20bn, according to Price. "We have punching power with that kind of money to go out and negotiate how we port those alpha sources and to get a favourable pricing deal that then reflects into the fund we are offering to our clients."
And diversified growth funds should not be confused with new balanced, according to Price. "The detractors will call it old balanced but to those who will take it seriously it is going to be a genuinely progressive solution for the marketplace in my view. It can sit on top of an LDI strategy, on a standalone basis, or within a DC solution.
"It's not about asset allocation, its about alpha sources," he continues. "It's about finding the best of breed when you pick it. So it's not just about putting 5% in emerging market equity. We would put 5% in emerging market equity if we could find an alpha source that has a negatively correlated risk with the rest of what we are doing. So this is unlike asset allocation in that there is more depth to what is going on now."
Pioneer has also this year launched its Restructuring fund, a hedge fund with a private equity-type lock up that aims to invest with managers "who have the ability to influence the outcome of their investments", either through active restructuring, active management, advising management or being active in creditor's committees. Positioned in anticipation of the credit crisis, the fund returned 22.48% from inception at the end of June this year to end-October, the last figures that Pioneer was able so supply before this article went to press. Price says Pioneer wants to bring more such tailored solutions to the market in coming months and years.
Although the firm has ambitions for the Netherlands, and has its own multi manager unit, Price is sceptical about fiduciary management. "I struggle to see how in the asset management business it can be credible to do anything other than manage the asset pool," says Price. "Some people struggle in the multi manager business with huge research divisions. This might be one where the asset management industry is jumping in before the science actually justifies our position there."
Nevertheless, Price does say that he would re-examine the fiduciary business model were it to attract assets in wider Europe. "We do have the component parts to do this and we have the administrative know-how because we do similar arrangements in Italy and Germany."
Defined contribution (DC), however, is an area of potential for Price and Pioneer. "Ten years ago someone said to me, ‘get on top of DC'. But the big gorilla on the table is defined benefit and DC has only just started. In terms of positioning today we've been working on solutions to address the DC market on a pan-European basis and in each individual market."
Price says Pioneer will use its experience in Italy, Germany and Austria when rolling out its products in Europe. "In the UK we need to look at how UCITS III and MiFID plays out because that will either create opportunities or questions as to how you approach the market," he adds. " I would still be a little bit cautious about being a big brass player in DC in the UK, but not because I think it's not going to be enormously successful. It's about what success looks like in five of 10 years from now. I don't think that's absolutely clear."
Paul Price - Previously managing director of Massachusetts Financial Services in London, and head of fixed income sales at Lombard Odier, Price joined Pioneer Investments in March 2006. His is responsible for Pioneer Investments' institutional business around the world