Twenty years ago, when Chris Cuffe was head of Colonial First State, he wanted Money Management magazine to name, at its annual awards dinner, a ‘fund manager of the decade’. This would have been a departure from the influential magazine’s usual ‘fund manager of the year’ centrepiece. Cuffe assumed Colonial First State would get the gong.
Cuffe had led the transformation of Colonial First State’s asset management arm over the previous 10-or-so years, as well as setting up its wholesale distribution system and platform development. And Greg Perry, the CIO, was the top-rated investment manager in the country.
Bruce Madden, the magazine’s then editor, remembers meeting with Cuffe to discuss the award after the research firm Assirt had provided the performance numbers. “Cuffie took me to task on the underlying awards methodology, claiming that Assirt had it wrong, by his calculation. He had back-filled the numbers, unit pricing and MERs on his own spreadsheet. It should not only be fund of the year but fund of the decade. But this would imply that our previous Australian equity winners were duds,” Madden said. “I could never fault his passion and directness, though.” They were the days of in-your-face marketing.
Colonial First State Global Asset Management, now a A$218 billion global manager, is about to go through its next transformation. In gentler but more difficult times, following the turmoils of ‘tech wreck’ and other hurdles of the early 2000s, including management upheavals, and a major UK expansion for what was, and is, known internationally as First State Investments, the firm went about transforming itself into a truly global investment manager.
CFSGAM eventually separated its operation from the wholesale/retail distribution and platform businesses. And, under its previous chief executive, Mark Lazberger, set up a governance structure to take on the biggest in the world. Following the restructuring of many bank-owned funds management businesses, Commonwealth Bank, Colonial First State and CFSGAM’s owner, at first decided to float off the funds management arm. But it abandoned that pan in June last year in favour of a demerger of CFSGAM along with other non-core businesses. It was then approached with offers for a trade sale from other international financial services firms also looking to expand their funds management businesses internationally. One of these was Mitsubishi UFJ Trust and Banking Corporation, a wholly owned subsidiary of Mitsubishi UFG Financial Group (MUFG). The purchase of CFSGAM for A$4 billion was completed early this month.
Next month, the 300-odd Sydney staff at CFSGAM will move out of the Commonwealth Bank building in Darling Park and head down the road to Barangaroo. The shift, according to Mark Steinberg, the chief executive who replaced Lazberger last September, will coincide with a name change.
Steinberg, who has had a range of senior executive positions in both financial services and other industries throughout his career, says that the new owner, itself a manager with about A$800 billion under management, will provide the strategic support to continue the growth of the global business.
He said, on August 2, the completion date: “Today marks an important day for our business. Under MUFG (Mitsubishi UFJ Financial Group, the parent company) ownership, we will have the financial backing and shared strategic vision to enable us to become an even stronger global investment manager.”
Steinberg was previously CFO at CFSGAM and, subsequently, CFS, before leaving to take on the CFO and COO roles at Cover-More, a listed insurer, which made several acquisitions before being taken over itself. He then returned to CFSGAM in September 2017 before becoming the chief executive a year later. He had also worked for Vodafone where he was the CFO for the New Zealand business, finance director for the Japanese business and CFO of the Australian business.
To effect the acquisition MUFG has set up an Australian-domiciled company, which has its own board. The directors currently include three from MUFG, under chair Sunao Yokokawa, and two from CFSGAM, Steinberg and Suzanne Evans, the CFO. Yutaka Kawakami, also one of the MUFG board’s new directors, will be seconded from MUFG to CFSGAM and become Steinberg’s deputy CEO.
“Both Mitsubishi and I have a view to enhance the capabilities of the board through the appointment of independent non-executive directors, but we want to get into an operating rhythm first and then identify the relevant skill sets and experience for that board expansion,” Steinberg said. “From a cultural perspective we need to get to understand each other better. We are at the start of a relationship. We’ll use secondees from both sides and set the agenda.”
MUFG has experience in buying big stakes in other fund managers. It still owns 15 per cent of AMP Capital and had previously owned 5 per cent of Standard Aberdeen. It also continues to have a strategic relationship with the Edinburgh-based global firm Baillie Gifford, an independent asset manager dating back to 1908. Baillie Gifford has also been represented in Australia by the CFS distribution arm, which is not a part of the MUFG transaction. While CFSGAM could probably add a lot of value in that relationship, Steinberg said that it was outside the remit of the current CFSGAM business.
“[MUFG] have given us a strong message about respecting the autonomy of the investment teams,” Steinberg said. “We need to bed down the acquisition and work through the transition arrangements, while giving the right assurances to clients and staff.”
The new brand, scheduled to be announced around the middle next month, will have a single global name – rather than the dual names used to date – but will cater for sub-brands for the specialist or niche investment teams.
Greg Bright is publisher of Investor Strategy News (Australia)