Here’s hoping Stanlib can take a spot as a premier fund manager
• New investment chief Mark Lovett wants everybody to feel they are contributing
Ihope Stanlib will once again take its place as one of the premier fund managers in SA. It has huge advantages over most of its peers because of its position in the Standard Bank Group and as fund manager of the Liberty product range.
It is all very well to criticise, as I often have, its poor equity and balanced fund performance. However, consider that it is in much more robust shape than Ashburton, FirstRand’s fund manager. It would have been cheaper for FirstRand CEO Alan Pullinger to light a bonfire of R200 notes in Merchant Place than support this folly.
I am a big admirer of Nic Andrew and his best-of-breed unit trusts at Nedbank, but it is a low overhead model with no inhouse stockpicking.
Absa Asset Management had a few moments of glory under Alan Miller and Errol Shear. Now there is strong speculation that it is for sale.
I can see Liberty CEO David Munro understands the value of keeping an in-house manager intact. After all, there is an inexorable move from life-based endowment policies to far more flexible unit trusts. A lot has already been done to clean up the confusing range of unit trusts, some with dreadful names such as Nation Builder.
There are now just two active equity unit trusts, Equity, which can invest up to 30% offshore, and SA Equity as a pure local building block.
There is now just one equity process run by Herman van Velze. I won’t tell you to switch to his funds but if you are already there, Van Velze is a safe pair of hands.
His new boss is Mark Lovett, who is in charge of all the investment franchises. But he has been involved in equity investment for more than 30 years: his relationship with Van Velze will be pivotal.
Lovett worked out of London for several asset managers, perhaps not the big star firms — more the Adam Sandlers and Ben Stillers than the Tom Cruises and George Clooneys.
He did meet some stars in his early years at Barings, including Crispin Odey, later a big hedge fund manager, and Richard Buxton, who ran Old Mutual Global Investors. Lovett’s three longest stints were running the equity businesses at Allianz Global Investors, a niched part of the giant German insurer Ignis, which was part of the Phoenix Group (and is now buried in a woolly mammoth called Standard Life Aberdeen) and latterly at Nordea, the largest Nordic bank, which involved frequent trips to the fleshpots of Denmark and Sweden.
Lovett says it is not a given that a life insurer has to own an asset manager, especially an active one. Legal & General owns a large asset manager, but it is focused almost entirely on index funds and actuarially based liability-driven investment. Standard Life has bulked up in asset management, but in effect exited a lot of life insurance. It’s a route Old Mutual, Sanlam and Liberty are highly unlikely to take.
However, Lovett says that in cases in which the life office does not have the scale to run its asset management in-house, it merges or even sells the fund manager. With such a large footprint through its parents it seems highly unlikely that Stanlib will be sold or disbanded. But he believes it needs to think like a third-party asset manager, not as an in-house business. It has “captive” business from Liberty but it can’t take it for granted — if it is in the interests of Liberty clients to move its investment products to another manager it should not hesitate to do so.
Lovett says there may be a number of separate franchises at Stanlib, but they do not have to behave like separate silos. There are already two cross-franchise meetings a week — property and fixed income might debate yields, for example.
He is even contemplating that most ancient of fund management customs: “morning prayers”.
Lovett says Stanlib has expertise in a wide range of investment disciplines. Key strengths are fixed income under Henk Viljoen and Ansie van Rensburg, as well as property under Keillen Ndlovu. It also has the skills in place for passive and quant funds. It has expanded into alternatives such as infrastructure funds, though this proved a commercial flop.
So how much can Lovett change the Stanlib culture? Like all fund managers, the portfolio managers are perceived to be senior to analysts. He hopes to build a flat structure where everybody feels they are contributing without necessarily climbing the hierarchy. He also believes analysts are more likely to get job satisfaction if they are rotated between sectors every three to five years.
He has a pragmatic approach to investing, in which portfolios constantly evolve and the firm doesn’t stick stubbornly to an entrenched view. The opportunity cost from value managers refusing to invest in technology shares has been colossal.
Over one year, Stanlib’s equity and balanced funds are finally in the top half of the tables, but its Large Manager Watch institutional balanced funds are still in the fourth quartile. I have no doubt that Liberty and Standard Bank will be generous if Lovett wants to bring a few big hitters into the firm. In a normalised year Stanlib should account for about a quarter of the Liberty Group earnings.
But will skilled investment folk want to join what has sadly been a perennial underperformer? It could take up to five years before Stanlib is treated as an employer of choice. It helps that it has an office in Cape Town, where almost all its large competitors are based, but a branch office might not be a exciting prospect for many.
And maybe it is time to reconsider that awful name, “Stanlib”, dreamt up by former Liberty boss Roy Andersen and his Standard Bank counterpart Jacko Maree on a plane to London. Just settle on either Liberty or Standard.
HE IS EVEN CONTEMPLATING THAT MOST ANCIENT OF FUND MANAGEMENT CUSTOMS: ‘MORNING PRAYERS’