New culture at the heart of Old Mutual

Becoming boss of Old Mutual’s asset management arm – a UK subsidiary of the Anglo-South African insurance firm – was not the obvious move for a journeyman funds distribution operator, who accepted an initial approach from headhunters with some scepticism.

“When I got the call, I was reluctant to start with,” admits Julian Ide, something of “a face” in the fund management industry for the last 25 years, having completed stints at ABN Amro,  Merrill Lynch, Credit Suisse and most recently BBVA. “I was worried about [Old Mutual’s] presence in the market place.”

He had been also been enjoying his time as an expatriate in Spain, attracted to the country’s vibrant culture and cuisine as well as an enviable lifestyle. But trying to push BBVA’s institutional funds in an uncertain market, previously dominated by retail sales of structured products through bank branches, was proving something of a strain.

Indeed, the slow-moving Spanish scene may have made the new role seem more attractive, especially when talk turned to re-branding and integration, processes which an old hand like Mr Ide needs to fire him up.

When he was recruited in October 2011, OMAM was about to be re-launched as Old Mutual Global Investors (OMGI). This would be a separate brand, but operationally, it would be integrated into the broader Old Mutual Wealth platform – previously an assortment of ‘Skandia’-labelled entities. Overall, the amalgamated Old Mutual Wealth business now handles upwards of £70bn (€82bn), within the entire group’s $260bn (€200bn) global total.

Getting into this swing of restructuring and target-setting, Mr Ide has promised to double the £13bn in assets he took over by 2015 and has already added £1bn to the OMGI franchise since his arrival. But profitability expectations at board level are significant, as Old Mutual’s £3.6bn acquisition of Skandia in 2006 is yet to be justified.

A key aim of Mr Ide is to ensure there is a diversified portfolio of products on offer to suit all markets. Among more than 20 senior hires, he recently recruited Schroders’ head of equities, Richard Buxton, to run a £2bn UK equities book. Ed Meier and Errol Francis will also join from Schroders in June and Rob James will come from Aviva in the summer.

Alongside this is a similar-sized fixed income pool, including total return and global strategy products and a $500m hedge and quant funds business, which prospered during the 1990s, but has struggled more recently, requiring greater emphasis on distribution (see box).

The fourth desk and the most high-profile is the £4.4bn multi-manager team headed by John Ventre, one of the best communicators the group has, a strong proponent of the sub-advisory model of outsourcing retail asset management to the best institutional performers. Mr Ventre is also a vital link in taking the old Skandia ‘best ideas’ funds into a new era under the Old Mutual name.

The biggest growth for a separate category of sub-advised single manager funds, currently accounting for £4.6bn, has come from the US, Europe and Asia, with Taiwan identified as a hotspot. Emerging market debt, total return bond funds and Asian equities have all sold well for OMGI in the Far East.

Although last year’s merger of a number of Skandia franchises with OMGI to form Old Mutual Wealth led to 200 job cuts, Mr Ide prides himself in keeping all of the investment talent intact. His stated aim is to increase profits through fund sales, while maintaining positive investment returns.

“The obvious thing to do was merge and create a scale business,” says Mr Ide, who spent four months last year putting the units together and addressing the cost base. “We found  duplicated functions, with overlap in distribution.”

But the more fundamental problem was a lack of zest in the sales operation. “Our distribution wasn’t sufficiently aggressive or sales force pro-active enough,” he recalls.

“We are an investment-centric business, not a marketing-led operation and I make no apologies for that,” says Mr Ide, adding that the Old Mutual funds operation, under its various guises, has had a reputation for creating alpha. Up to the end of 2012, 80 per cent of funds were performing above median, with 30 per cent in the top decile of their category. “This should present an extremely strong narrative,” he believes. “But we have not effectively distributed this story.”

So while the investment team has been preserved and added to under his watch, the sales side has been by his description “reconfigured”, with a new-look team in place at the beginning of 2013 under Warren Tonkinson, a former UBS stalwart.

“This has led to a major cultural change, with our distribution team operating in a way it has never operated before,” says Mr Ide, who talks about 2,000 client meetings so far this year plus an increased emphasis on cross-group sales and referrals.

The new approach, he says, is focused on clients rather than geography, with specialist sales units in place for market segments such as advisers, discretionary wealth managers and family offices. “Not only do you need a certain level of activity, but a marketing plan and product strategy to support distribution,” he says. “These three elements can combine into a real strategic sales effort.”

So far in 2013, flows have been across a wider range of products, affirming his strategy of diversifying the offer. While the switch from fixed income into equity products may not be as widespread as Mr Ide and many of his peers across the funds industry may have hoped, he is encouraged by the gradual seeping out of money from a “handful of megafunds” to a wider range of new favourites.

Mr Ide has told analysts of his desire to be working with operating margins of between 30 to 40 per cent within three years, and a plan to be among the top three UK players in terms of assets within five years. “People don’t want to underestimate the level of ambition we have got,” he says. “I want to be part of a great asset management business, not just an OK one.”