Unlike parochial Quilter, Ninety One’s X-Men survey the globe
• Investec’s newly listed asset manager has its eyes set on markets in North America and China
No-one would have made a quick buck (other than short sellers) out of Ninety One’s split from the Investec Group and listing on March 16.
Ninety One’s R32 share price was well below the indicative price in the prospectus. Its revenue is correlated directly to international equity markets, but more than half of its assets (£60bn) are in either fixed interest, balanced funds (inevitably referred to by its marketers as “solutions”) and alternative assets such as infrastructure.
Ninety One CEO Hendrik du Toit makes no bones about it that he sees the business as a Schroders in miniature, with a wide range of capabilities and a genuinely multinational footprint. This differentiates it from single style shops such as Jupiter in London, Dodge & Cox in San Francisco or the truly enormous bureaucracies that have more in common with banks or large life offices than asset managers, such as BlackRock, Vanguard and Franklin Templeton.
Du Toit says it wouldn’t have been possible to build Investec Asset Management without the cellphone. It enabled Investec to send analysts into the field at a time when most investment teams at the established shops lived off a stifling routine of meetings, waiting for the bell to ring for the next one.
Du Toit says Skype and teleconferencing have made keeping up with clients during the coronavirus crisis far easier. Ninety One has the advantage that its clients are well informed, he says. It divides them between institutional consultants and financial advisers — it channels all its retail business through advisers. But if you are really desperate I am sure you can buy one of their unit trusts online.
Ninety One aims to be on the menu of advisers across the globe. Richard Garland is spearheading this process, a man of such energy some believe he is one of the X-Men. We already know who Du Toit is.
The other big initiative is in North America, where the company has employed 40 experienced and by no means cheap business development experts. The big opportunity is for pension funds that still have too many of their equities based in the US, and it should employ a manager to ramp up the non-US exposure — in the medium term at least.
The third big initiative is in China, where it sees an opportunity as the country diversifies from local assets. Ninety One has also built the capacity to manage Chinese equities and fixed income for its Western clients. But that could take some years to become profitable as the trade war between the US and China has made both sides more insular. In fact, the reversal of the trend to globalisation will prove a challenge for a wouldbe global business.
One business that is, in contrast, cheerfully parochial, is Quilter, the UK iteration of Old Mutual Wealth. It has a small number of expatriate clients but otherwise focuses on UK residents. I got quite a shock when I saw it had bought Prescient. Quilter had already sold its direct asset manager, Merian, to a private equity firm. Merian has since been acquired by Jupiter Asset Management. But no, Quilter did not make Prescient’s main shareholders, Herman Steyn and Thabo Dloti, rich.
This Prescient is a very high net worth manager. The kind that offers services such as washing your car while you wait and cleaning your shoes. It will fit neatly into Quilter Cheviot.
It has also bought more mundane financial planning shops such as the Lighthouse Family and Sage Derby. About 30% of the flows onto its platform (similar to Glacier in SA) now comes from its own tied advisers, but it needs to remain the platform of choice for independents.
For the first time the new platform being rolled out over the next six months will give access to exchange traded funds: several SA platforms have beaten them to it.
Quilter’s new enhanced online user experience is also probably long overdue. The platform is still called Old Mutual Wealth until the migration finishes in the UK summer. Let’s hope Quilter clients don’t get put off by the shenanigans at Old Mutual itself.
Quilter is a largely annuitybased business with fees ticking over every month. Advisers take their time to switch out of its platforms or its investment portfolios. CEO Paul Feeney says Quilter’s peers reported weaker earnings, so he is more than pleased with the 3% increase in profit before tax to £182m.
Its advice and wealth management unit enjoyed inflows of £3.5bn, equal to 8% of opening assets. The lower-margin platform assets had inflows of £1.4bn and stand at £77.7bn.
Feeney is no doubt delighted that he has finally got rid of Quilter Life Assurance, a capitalintensive legacy business with a very old-fashioned range of policies. Quilter is now the archetypal capital lite business. It will have a surplus of £375m for a share buyback.
Even with the reduced capital base there may come a point at which the market cap of Quilter exceeds that of its former parent, Old Mutual. The difference even now isn’t huge, with Quilter on R40bn and Old Mutual on R58bn. Quilter’s advantage is that it is a simpler business with fewer moving parts and a stable management team.
THE THIRD BIG INITIATIVE IS IN CHINA, WHERE IT SEES AN OPPORTUNITY AS THE COUNTRY DIVERSIFIES FROM LOCAL ASSETS