Good soldier draws up fortis battle plan

Fortis’ Richard Wohanka knows enough about poaching and trading to be a storybook character himself. Yuri Bender examines his business blueprint.

One of the most famous characters in Czech history is a fictional one. The Good Soldier Svejk, whose adventures during the Great War have gone into the country’s folklore, was a literary creation. Jaroslav Hasek’s worldly-wise folk hero fakes imbecility, is alternately fęted and admonished, and is eventually captured by his own soldiers, enjoying adventure and avoiding conflict at every stage. Richard Wohanka, chief executive officer of Fortis Investments, son of an émigré Czech businessman, shares some of the attractive Svejkian traits. His outward modesty, self-deprecation and diplomacy are combined with an unyielding nature and hidden ambition. He denies profitability will be significant, yet the balance sheet remains healthy, thanks to strict cost controls. He seems surprised at suggestions of aggressive recruitment, yet has swooped for six heads of product lines from rivals since joining in November 2001. He says acquisitions are unlikely, yet is in the process of making them. Mr Wohanka affects a casual, almost avuncular demeanour as he reveals his blueprint to diversify the Belgo-Dutch group’s revenue away from domestic markets and the insurance company’s internal business. “Our emphasis is on providing good products for the rest of the group, to achieve a minimum target of 35 per cent external clients, and to grow our assets by not less than E5bn a year, excluding market effect. If we can achieve these three new targets, we will run a good shop,” says Mr Wohanka. Personal savings Just over half of assets managed by Fortis currently come from Belgian clients, already down from 75 per cent when Mr Wohanka took over the active, fundamental research-based manager 20 months ago. Germany, Austria, Italy, Spain and the UK are the key targets for growth. “Germans have a high savings rate and buy a lot of funds,” says Mr Wohanka, who has overseen the recent opening of a Frankfurt office. “It is one of the most natural markets for us.” He points to increasing self-reliance among continental private investors. “There is a high degree of cynicism in Germany, France and Italy as to the ability of the state in 20 years’ time to pay pensions at a rate which they are promising today,” believes Mr Wohanka. “Many people here save to a higher degree than they do in Anglo-Saxon countries as a result of that cynicism,” says Mr Wohanka, gesturing out across the Boulevard du Roi Albert II from his office in central Brussels. “There is a trend in Continental Europe to save through mutual funds. Sometimes they come disguised in the form of a life insurance wrapper. But at the end of the day, these are personal savings, rather than contributions to an employee’s pension plan.” Of the E74bn under management, 49 per cent has been sourced from fund of fund managers, private bankers, retail distributors, insurance companies and financial advisers. Institutional pension money is expected to grow faster, but Fortis Investments will be applying greater resources to developing products for private clients through distributor partnerships. “In profitability terms, the contribution of the wholesale retail business will be higher, as the production complexity is not so high. The problem today is that retail customers are often sold inappropriate products.” In many cases, says Mr Wohanka, private customers are sold “balanced” funds, and are led to believe that a 50/50 equity-bond split represents a conservative portfolio. “But any individual with a 50/50 portfolio over the last three years would have experienced anything but stable performance. Ironically, hedge funds are more stable in terms of predictable, repeatable performance, but they have the reputation of being ritzy and aggressive.” Absolute returns The job of Fortis Investments and other wealth managers over the next three years, says Mr Wohanka, is to take “all the distinctive characteristics associated with hedge funds and incorporate them into products which we can manage for distributors.” The new breed of products would be constructed with an “absolute return dimension, but applicable for the retail market.” A streamlining of the product manufacturing process began when Mr Wohanka was recruited from WestAM, to find a collection of several unconnected units brought together under the Fortis umbrella. The names such as Générale de Banque, Fimagest, MeesPierson and Harbor Capital Management all had distinguished backgrounds. “My job was to turn a federation of asset management companies into a single working system,” reveals Mr Wohanka. He has since abolished the central strategic committee and substituted it with a system of wholly autonomous investment centres, with fixed income products clearly dominating. Ever-changing moods Bonds, including corporate credit and emerging markets, have always been a core product at Fortis. It is only investors on the other side of the Channel who need persuading. “In the UK, equities have not yet been replaced with bonds as the core holding, despite all market indicators showing that they should have been,” says Mr Wohanka. Continental investors have been moving out of equities since a short-lived love affair ground to a halt in 2002, and Mr Wohanka is conscious of the need for a diverse range of products to accommodate the ever-changing moods of private clients. Creating these products requires talent. “We are trying to improve our product quality, and in doing so, we have been successful in recruiting some very talented people,” he says. Guy Williams left Northern Trust last year to run Global fixed income for Fortis from London. European convertibles boss Jacques Joakimides followed Mr Wohanka from WestAM. And Gilles Meshaka joined from CDC Ixis to oversee large cap European equities from Paris. Mr Wohanka believes the recruits were attracted by his firm’s financial strength and wholesale/retail mix across five key markets – Luxembourg, Belgium, France, the US and Holland. Fortis Investments currently contributes E45m annually to group profits. The insurance and banking arms of Fortis make E1.6bn after tax. “If Fortis wanted asset management to account for 20 per cent of its revenue base, we would have to make eight times as much money. We can’t do that without the need for making acquisitions. And we would need to pay E5bn for 350m worth of revenues,” says Mr Wohanka, demonstrating an easy familiarity with the economics of takeovers. He has already added E4bn and 21 staff through the acquisition of Banque Générale de Luxembourg Asset Management in January. At WestLB, he built up the funds capacity by acquiring and integrating three companies and adding assets of E30bn. “Some people talk of asset management as the third leg of Fortis, but that can never be,” smiles Mr Wohanka, respecting the current “ban” on further acquisitions. His former colleagues expect this to be lifted soon.

Acquisitions the name of the game In an age when international credentials are the key demand of asset management headhunters, the cv for Richard Wohanka does not disappoint. Born in Cocha Bamba, Bolivia, of mixed Czech and English parentage, he speaks four languages and has a sharp understanding of European history and the continent’s ethnic fault lines. After 13 years at Banque Paribas, where he moved from investment banking to asset management, and eventually won a seat on the board, Mr Wohanka headed up Baring Asset Management for an unhappy one-year spell, before joining the funds arm of German bank WestLB. At WestLB, he quadrupled the size of assets under management to E40bn in three years, through a series of acquisitions. When he joined, WestAM was totally unknown outside its home market. Many commentators have drawn parallels with Fortis, where he was recruited as chief executive of investment management in November 2001.

Wohanka: traits of self-deprecation combined with hidden ambition