Down to the nuts and bolts at Carne
John Donohoe’s funds firm, which has assets of €60bn under management, is growing rapidly, writes Fearghal O’Connor
JOHN Donohoe spends his days travelling the world to meet the highest fliers in the global funds industry but, at heart, he is a real nuts and bolts man. His earliest memories are from behind the counter in his parents’ Drumcondra hardware shop. Much of what the Carne founder and chief executive now brings to his booming Dublin-based fund management services business he learned there, he says.
“I worked in the shop from the time I could walk. I was doing Vat returns at the age of about seven or eight. I kid you not,” he says, seated at the huge boardroom table in his south city office.
“My parents’ philosophy was, ‘never overcharge, be reasonable, if they just want one screw, don’t try to sell them a packet’.”
It’s a lesson he brought to Carne when he founded it in 2004. The last two years have seen the company undergo phenomenal growth — about 50pc this year and the same last year, says Donohoe. It has just established a new centre of excellence in Kilkenny and now has assets of more than $60bn under management, nine global locations, 150 staff and over 400 clients— mainly large institutional asset managers and institutional investors. It works with 35 of the top 50 global asset managers in funds, equities, bonds, real estate, lending and a range of other asset classes.
But it was in hardware that Donohoe learned the fundamentals of business. Long after he had moved on from the shop, his parents’ approach still had things to teach him about the right way to do things. Just before the economy crashed they had reluctantly agreed to sell the shop and retire.
“Property assets were booming so there was strong interest,” he says. “Two clear choices emerged: sell to the local credit union or accept a much higher offer from Kentucky Fried Chicken.” Donohoe’s parents chose the former, he says.
His agility with numbers served him well as he progressed to become a trainee at KPMG. The firm, partly because he was the only trainee with a car, dispatched him to act as financial controller for a large client in a provincial town.
“I realised that it doesn’t matter what size a business it is, the principles of a hardware shop and a large company are the same and being comfortable with numbers is a great help.”
At KPMG Donohoe was exposed to a wide range of clients from aircraft leasing, to banking, to stockbroking, to insurance. Donohoe had his sights set on London. But on a trip to bring handicapped chil- dren to Lourdes in 1990 he met his future wife Mary. Within six months they were engaged.
“She didn’t want to go to London. She didn’t say it but I knew. I saw an ad for a job in Deutsche Bank in Dublin and Mary encouraged me to apply.”
The job had the international scope he craved and he garnered experience across asset management, wealth management and banking. At the time — around 2001 — the regulations around investment schemes and mutual funds in the EU were changing and Donohoe found himself working through the technical implications of these changes, not least the advent of Europe-wide investment funds called UCITS.
“I was very interested in the whole area of product structuring for investors, designing funds for investors and there were very few people in the industry that actually had the skills and knowledge to do that. Carne now covers every type of asset class and we have specialists in each area to break down risk and plot a path to make sure the right products end up with the right customers.”
These days, with so many specialists employed, Donohoe’s job involves a lot of talking.
“Our clients are the largest asset managers in the world, the Blackrocks and JP Morgans and HSBCs. I spend a lot of the time talking to CEOs, chief investment officers, heads of distribution and operations. I visit them, have a coffee and find out what is going on.”
Donohoe’s chats with the great and the good of the world of finance also regularly turn to the affairs of the wider world. Brexit obviously looms large, not least the plans of financial firms in the City of London once Britain leaves the EU.
“Quite a number of them haven’t actually decided what they’re going to do and they have adopted ‘a wait and see’ approach. The good thing about our industry is that it’s modular. There are many different activities and you can break them down into different blocks and so they can identify what they can continue to do in the UK and what they need an EU-based firm to do.”
As Brexit approaches, UK asset managers will need to make alternative arrangements to future-proof the management of their EU products. This presents an opportunity for Ireland and Carne is scaling up in part to ensure it is sufficiently prepared to meet market demands dictated by Brexit, he says.
The new operations centre in Kilkenny will help facilitate this growth. When it launched a week ago, one invitee was a notable absence — then enterprise minister Frances Fitzgerald who was in the teeth of a political storm at the time and perhaps not surprisingly bowed out of the event. The company, of course, understood but it was perhaps a suitable metaphor for the dangers of political instability to the real economy. It is a key threat Donohoe identifies as troubling his otherwise relatively sanguine economic outlook.
“Multinationals or asset managers setting up their funds in Ireland have choices. They can go elsewhere, they can pick different locations. They also have so many other uncertainties that they are working with that they just want to pick somewhere for the next 20 years where they are not going to face problems. They understand that there will be short-term local spats and that is absolutely fine. What they’re more concerned with though is if things happen that result in a longerterm change in the political environment, for example around the political attitude to business.”
Ireland, he says, by and large presents a welcoming environment but there can be issues. “If you’re setting up a data centre and you’re not quite sure how long the planning is going to take but you can go to another European location where you’re certain of the outcome, what would you do?” he says.
“Some people have forgotten that literally nine years ago this country was apparently bankrupt. Internationally, people cannot believe how far Ireland has come. We should be confident about the future but we shouldn’t be arrogant and that is the danger — people go back and they make the same mistakes. We had two favourable things happen to us that allowed us to get back on our feet and we shouldn’t forget that: multinationals came and generated thousands of jobs directly and indirectly and European interest rates went down.”
Of course, not everyone has enjoyed the fruits of recovery in the way that the financial sector has done since economic recovery took hold in Ireland and further afield. Questions have been raised how some wealth managers conduct business for high-net-worth individuals, particularly following the recent release of the Paradise Papers.
“The transfer of wealth towards the rich and away from the poor is not a new story,” says Donohoe. “There are many reason why this happens. Governments have many tools at their disposal to actually try and make things more equal. Since 2008, both from a regulatory and a taxation point of view, governments have been trying to tackle that situation.”
The key thing, he says, is to ensure that wealthy people are taxed appropriately somewhere and investment managers must play a part in this.
“A lot of the work we do with our clients is around regulation and compliance and making sure that they are doing the right things, with the right processes and procedures in place. There has been a cultural change and people see the need to comply. They know if they are found to be wanting the consequences are huge, not least to their reputation.”
But Donohoe, who has spent significant amounts of time involved in charities including the Laura Lynn Foundation and a children’s shelter in Chernobyl, comes to the defence of one heavily-criticised fellow prominent northsider: U2’s Bono.
“Sometimes we forget there’s actually some good rich people like Bill Gates or Bono who do absolutely terrific work. Look, I don’t know Bono but all I can say is that you can choose to ignore all the good things that he’s doing. He’s chosen to give a lot of both his money and his time to very good causes. It doesn’t create the same headlines.”
Carne itself does not reveal extensive financial details about its operations, with offices in Ireland, the UK, Switzerland, Luxembourg, the Caymans and Jersey. But Donohoe says that huge growth rates are not his key motivation.
“Despite 50pc growth in each of the last two years, believe it or not we’re actually a very conservative company. The reason that we’ve been able to grow at those type of rates is because we hire very experienced people. We’re very top heavy. Of our 150 people there is over half of them who were directors or managing directors in previous lives. That allows you to actually do things in a very controlled way. We don’t take chances and growth is driven by our client’s needs. We’re not growing for the sake of growing but we’ll continue to grow it as long it doesn’t endanger what we have. We’re ambitious people but not for the sake of it.”
Donohoe smiles when asked if Carne were a hardware store rather than a financial company, would he look to grow it into B&Q?
“I suppose if the opportunity arises and we can be B&Q, why not? Why wouldn’t you? However what you really want is to be the blue chip of the industry.” He prefers Carne to be smaller and to retain a very good brand. How people feel about the company is more important than the money, he says. But with growth rates like that, it’s obvious his customers feel very good indeed.