The big changes in asset management now are happening, once more, in the active space. Passive – including ‘smart beta’ – has become a bit like last year. The investment world is changing very quickly, as it does from time to time. For instance: did ‘value’ finally come back last month (September), yes or no? The answer is ‘yes AND no’.
Good managers will outperform over the long term, whether their style leans towards growth and quality or whether it leans towards value. Martin Currie Investment Management, the global equities house with a strong Australasian presence, provides an interesting case study.
According to Zehrid Osmani, the head of the Edinburgh-based Martin Currie ‘Global Long-Term Unconstrained’ fund, which has become a flagship global strategy for the firm in the four years since it was launched: “If you go active in the proper way, that is active in your deviation from the benchmark, then you have to have more chance of delivering the right outcome over the longer term.”
Although the style for his global strategy is to emphasise growth and quality, he believes that value may have a little further to go in terms of its outperformance since its revival around the world in September. The Martin Currie Australian equities strategy, run by Reece Birtles out of Melbourne, has a value orientation. It was the number one performing strategy in the eVestment Australian equities universe during September.
“We are received very warmly around the world,” Zehrid said last week on a visit to Australia with his boss, Julian Ide, who became chief executive of Martin Currie in March this year. The global fund has been particularly well received by Australian investors, Ide says. “Our 140-year old firm was built to be disruptive… We are like a 140-year-old start-up.”
Ide was recruited as global head of sales and distribution mid-way through last year and became the chief executive in March this year, on the planned retirement of his predecessor, Willie Watt. Watt had driven the big shift from being an old staff-owned boutique to becoming a major contributor as a multi-affiliate manager of the US-based global funds manager Legg Mason.
As a sign of the importance of Martin Currie within the nine Legg Mason affiliate companies, Andy Sowerby, the former global head of distribution for Martin Currie, formerly based in Edinburgh, accepted the job of running Legg Mason’s business in Australia and New Zealand in 2016. Earlier this month, in October, he was promoted to the job of running the Asia Pacific business for Legg Mason, while still being based with his family in Melbourne.
Getting back to Martin Currie, Julian Ide said in Sydney last week, that by April 1 next year all Investment teams will be on revenue share, and all of the firm’s sales and marketing people would be paid exactly the same way. This has been transformational,” he said.
“As a consequence, we are eliminating the organisational paranoia you can get by having individual remuneration differences for good performance. As a consequence, thanks to the sales team, we now have a far bigger pipeline of new business. We have embarked on a big push to drive transparency throughout the organisation.”
Also, as a consequence, Ide said, Martin Currie would deliver its best financial result on its core business for its financial year, ending on March 31 next, since the GFC. “All the areas we operate in are now flashing green.”
The style shift in September was one of the biggest in history. Normally, outside of a major correction such as what happened with “tech wreck” in 2000, value takes a while to creep up on the market. And prior to September, it had been eight years of underperformance in most major markets, including Australia.
Zehrid said: “We did a lot of thinking but changed nothing fundamental in terms of market re-positioning as a result of it. The key question is whether anything has happened in the portfolio that you weren’t expecting. And it didn’t… There is a persistence to our style-drift exposure without changing how we build portfolios.”
Ide said that he wanted to make sure that Martin Currie was capturing all the possible ideas from its people around the globe to share throughout the business divisions. “Kimon Kouryialas (head of distribution for APAC) and Reece – both based in Melbourne – are coming to our twice-yearly global strategy meeting in Edinburgh this week – and play key roles in the business. Why not use Reece’s expertise in investments and Kimon’s in distribution and client solutions for the whole company?”
Kouryialas recently recruited Eu-Jene Teng as a senior business development manager, based in Melbourne. He had previously held similar roles at Pinnacle Investment Management and Macquarie and Vanguard.
Greg Bright is publisher of Investor Strategy News (Australia)