What is your role exactly, James?
As head of international advisory my role is to grow our advisory business globally, with a particular focus on multi-asset.
GAM has primarily been an institutional house for many years, dealing mainly with pension funds and private banks. But in the past three years we have built up a strong advisory team. Doug Branson runs the UK advisory business, with Duane Hasnip and Sean Cooney as his senior sales managers.
I lead the international advisory business, with Freddie Streeter as my senior sales manager. We have strong teams in London, Zurich, Hong Kong and Dublin. Our target clients internationally are IFAs, insurance companies, trustees and retail banks.
How would you rank the regional markets in which you operate?
The Middle East is our biggest region, attracting approximately 35% of our business. Then Asia, the EU and Africa. In 2016, we plan to focus more on Asia, Europe and Latin America.
Given the regulatory backdrop of uncertainty in the Middle East, why do you see so much potential there?
From a regulatory position, the United Arab Emirates is unique. If you look at other markets, such as South Africa, the EU, Singapore and Hong Kong, they are all in the process of bringing in new regulatory regimes.
The UAE has four different regulators looking after different parts of the industry, and this has created some confusion. However, we are delighted to hear that the Securities and Commodities Authority has indicated it will change its rules on fund authorisation in 2016, and we certainly welcome more access to the marketplace.
The growth we have seen in the Middle East has been from the IFA market, but what we hope to see in 2016-18 is growth from the retail banks. We expect them to focus more on multi-asset propositions, as opposed to single strategy funds, especially for their smaller client segments.
How do you distinguish your multi-asset offerings from those of your competitors?
There is so much noise in this multi-asset space that it is becoming increasingly important that asset managers distinguish their offerings in 2016 and beyond.
I am really pleased with the performance of the funds over the past three years (the three-year anniversary was in November last year), especially in 2015, which was a difficult year. Charles Hepworth and James McDaid, who run the funds, have done a magnificent job.
GAM prides itself on being an active asset manager. It is also the second largest absolute return manager in Europe behind Standard Life. This experience has helped us over the past year where traditional fixed-income strategies have struggled. Instead, we have allocated into absolute return and specialist fixed-income strategies, which have benefited the performance.
But in terms of differentiation, the unique benefit we have is our technology. One of the interesting things about GAM is that, although it is a large independent asset manager, it started as a private client business. GAM’s knowledge of this client segment was enhanced when we were owned by UBS from 1999 until 2005, and by Julius Baer from 2005 until 2009.
This experience has allowed us to combine the efficiencies of a unitised solution with the bespoke reporting benefits of a private client or discretionary fund management service. When owned by UBS, we built the technology to offer bespoke reporting to our ultra-high net-worth clients. Last year we opened this technology up to our international clients. We believe that this is our major differentiator.
Within your proposition, what is the scope of your multi-asset offering?
We have five different strategies – defensive, cautious, balanced, growth and global equity. GAM is an international asset manager, and we believe it is important for clients to have access to funds in their reporting currency. We have the strategies available in US dollar, sterling, euro, the Aussie dollar, yen and Swiss franc. We hope to launch Singapore dollar and Hong Kong dollar in 2016.
Which of your multi-asset funds are most obviously taking off in terms of growth?
Unsurprisingly, the majority of our business goes into the balanced strategy, with around 40% of flows in 2015, with approximately 20% into cautious and 20% into growth.
We are also investigating bringing an income fund in 2016, as there has been a fair bit of demand for this from the industry.
Does that mean you are looking at alternatives to mainstream types of retirement product offerings such as annuities?
Yes, absolutely. The international advisory market has seen a lot of volume into pension schemes such as Qrops and Sipps over the past few years, and the main investment focus has been on the accumulation phase, for example growing the fund value within the pension for the client.
There are not many decumulation options available to international pension clients, so we see this as an increasingly large opportunity in the next three to five years.
How do you see IFA business models evolving and how is GAM tapping into this change?
This is a fascinating discussion because the regulators have made a lot of changes during the past couple of years. As you know, the first mover was Australia, and then came the UK with the retail distribution review.
We are now seeing other jurisdictions introducing new regulatory regimes. South Africa will apparently introduce RDR sometime in 2016; Mifid II and the Insurance Distribution Directive will be in place in the EU next year; we have the Monetary Authority of Singapore’s Financial Advisory Industry Review; and the recent changes in Hong Kong, where the Securities and Futures Commission has just introduced a rule that effectively opens up IFAs to potential damages for bad advice.