The senate group an introduction to met premium partners (27.6.2014)

1

Kevin HintonHead: Distribution and Client Services

27 June 2014

2 met collective investments

Agenda

1. Trends in the asset management industry and role of the

‘smaller/boutique’ investment manager in portfolio construction

2. Introducing our partners and their unique value proposition


Bifurcation – “Cheap” Beta and “Hunt for Alpha”

Revenue margins2005 Size ($x T)

Below averagegrowth

Aboveaveragegrowth

Source: National statistics, BCG analysis, Morgan Stanley Research. Projections 2005-2010.

10bp 30bp 40bp 50bp 100bp 200bp20bp

Index funds4.7

Active bonds13.2

Active equities16.2

Structuredproducts0.6

Quantitativeproducts0.4

Private Equity1.5

Hedge Funds1.2

Innovative productsTraditionalproducts

Market Tracking

Money Market6.7

B C

Real estate1.3ETF

0.3

A


Active managers becoming a scarce breed


The asset management barbell

Polarisation of cheap beta and difficult/expensive alpha


Background to the rise of boutiques

• Significant growth in global AUM of the asset management industry

• Regulations such as the Dodd-Frank Act – traders spun out of banks

• Top performers at large investment managers want more freedom to

implement their ideas

• Growing sophistication in investor base

• Expertise within niche markets

• According to David Swenson (ex CIO of Yale University endowment) –

“Owner operators simply work harder and better than rank-and-file

employees and that small, independent, entrepreneurial organisations

provide greater alignment of interest between firm and client.”

7 met collective investmentsSource: Sungard Asset Arena 360

Boutique Definition Heatmap (by region)

Entrepreneuralism Niche Focus Investment Team Ownership Small Staff Less than $10b

AUMSpecialised Products

US

Europe

Asia Pacific

Latin & South America

Middle East & Africa

Canada

All

Bright green indicates most popular term. Orange represent least popular term. Colour determined by popularity within each region


Rise of boutiques… the global experience

Source: Lipper, a Thompson Reuter Company (Legend indicates size of funds)


The rise of SA boutiques, growing in line with CIS equity trends and capturing even greater proportion

Mar-99

Mar-00

Mar-01

Mar-02

Mar-03

Mar-04

Mar-05

Mar-06

Mar-07

Mar-08

Mar-09

Mar-10

Mar-11

Mar-12

Mar-13

Mar-14

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

20

40

60

80

100

120

140

160

180

200

Total no. of large institutional managers No. of boutiquesTotal no. of funds

% o

f in

ve

stm

en

t m

an

ag

er

un

ive

rse

Nu

mb

er

o f

un

ds

Source: ASISA statistics for SA collective investment schemes


The value proposition of boutiques over larger, institutional peers

Mar

-07

Jun-

07

Sep-0

7

Dec-0

7

Mar

-08

Jun-

08

Sep-0

8

Dec-0

8

Mar

-09

Jun-

09

Sep-0

9

Dec-0

9

Mar

-10

Jun-

10

Sep-1

0

Dec-1

0

Mar

-11

Jun-

11

Sep-1

1

Dec-1

1

Mar

-12

Jun-

12

Sep-1

2

Dec-1

2

Mar

-13

Jun-

13

Sep-1

3

Dec-1

3

Mar

-14

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

Rolling 3 years excess returns of SA General Equity Funds (net of fees)

Average Bank, life assurer owned Average Boutique managersLarge Institutional Managers

Source: Morningstar data & Momentum Manager of Managers research


Median rolling yearly excess returns of Australian equity managers

Institutional Boutique

Source: Russell Investments. Past performance is not a guide to future performance


Key factors behind the global boutique boom

Other

Investor distrust of larger firms

Uniqueness of investment research

Investors looking for diversification

Agility

Client service

Focus on one investment strategy

Active management vs benchmark tracking

Pure and simple - performance

Talent

0% 10% 20% 30% 40% 50% 60% 70% 80%

2%

19%

20%

22%

45%

52%

61%

63%

66%

76%

Source: Sungard Asset Arena 360 industry report: THE GROWTH OF INVESTMENT BOUTIQUES: David versus Goliath (2012)


Boutique characteristics in South Africa

Type Description Example

Independent Group as a stand-alone firm

Part of large firmAcquired by larger investment managers

Multi-boutique / best of breed

• Collection of boutiques

• Own investment procedures and brands

Own brand

Brand of the manco


Global practicesWells Fargo Investment Management


Global practicesNew York Life


Imqubator seeding new investment managers


Levers by asset management business modelsVALUE PROPOSITION

ORGANISATIONAL MODEL KEY LEVERS

1 α HUNTERS (Multi-)boutiques Ability to manage complexity Specialised investment expertise

2 TRUSTED ADVISORS

Partnerships of advisors

Independence Client understanding

3 β GAZERSLarge independent investment managers

Branding power Economies of scale

4 DEMAND EXPERTS

Asset management units of banks/insurers

Group brand and distribution channels

Product innovation

Source: Roland Berger Strategy Consultants


Introducing the MET Premium PartnersTM concept


MET Premium PartnersTM objective

Help develop the advisory and investment management industry in South Africa through skilled advice, efficient administration and meaningful distribution – in a cost-effective way

But it’s about quality and not quantity


Our objective

• We aim to position and promote “Growing Tomorrow’s Leaders

TodayTM” and “MET Premium PartnersTM” within the broader retail

financial services industry

• We align with and seek partners that:

• We have identified as offering quality investment management skills

• That have specific skills in areas that we want to complement our

“Premium Partners” and universe composition across different strategies

and styles

• Have a high degree of management independence and want to retain their

own brand

• Have undergone rigorous research by Momentum Manager of Managers

and have therefore received our stamp of approval


How MET Collective Investments is supporting boutiques

• Increased visibility and scale

• Fund administration and compliance via the MetCI licence

• Letting good investment managers concentrate on managing alpha

• Backing of MMI’s balance sheet

• e-Commerce strategies

• ‘Core’ pricing on the Momentum Wealth Platform


Managers undergo vigorous research by Momentum Manager of Managers

Assets under management R318 billion (>R500bn group assets)

Staff 170

Investment team 23 (+ 14 London office)

Years in manager research 19

Years in multi-manager investments 19

Investment portfolios 200+

Parent company (MMI Group) AA Fitch rated

Measure Our numbers

Manager of Managers of the year 2013


MET Premium Partners TM


Diverse investment opportunities for growth investing

Category Partners

Active equity

Value

Quality Spe

cial

ist

stra

tegi

es


Diverse investment opportunitiesS

peci

alis

t st

rate

gies

Category Partners

Passive/Smart beta

Category Partners

Property


Diverse investment opportunities for retirement planning

Category Partners

Balanced

Flexible asset

allocation

High equity

Medium equity

Low equity

Income

Spe

cial

ist

stra

tegi

es


Diverse investment opportunities

Category Partners

Income

Flexible

Bonds

Money market

Spe

cial

ist

stra

tegi

es


Key

ben

efits

to fi

nanc

ial a

dvis

ors


If your investment boutique were a car, which one would it be?

Car Representation

Solid track record

Mid-market consistency supported by quality engineering

Stable returns

High performance in a well-defined niche

Provides protection and performance in tough markets

Focus on green credentials and sustainability

Old school investment manager for old money

Good value for a standard product

Source: Sungard Asset Arena 360


Web-app (PC, iPad and android)

• Manager information (fund fact sheets)

• Manager research (Momentum Manager of Managers)

• Thought leadership articles

• Community gateway

• Forms

• podcasts


Thank you


Disclaimer


How boutiques define boutiques

Entrepreneurialism

Niche focus

Small staff (>100 FTEs)

Investment Team Ownerhsip

Focus on Core Competency

Manageable AUM (>$10b)

Highly Specialised Products

0% 10% 20% 30% 40% 50% 60%

53%

52%

48%

47%

42%

33%

31%

Source: Sungard Asset Arena 360


The rise and rise of boutique investment managersAustralian experience

Source: Russell Investments

The senate group an introduction to met premium partners (27.6.2014)

Economy & Finance

Transcript of The senate group an introduction to met premium partners (27.6.2014)