Given the pressures on fund management groups to reduce fees, how is Henderson positioning itself on this front relative to its peers?
We would be quite robust and say it is about value, rather than about the fee. We focus on the return that the client gets after the fee. We are in the middle to top third of our peer group in terms of overall expense.
If you want to add alpha consistently, you have to pay people to deliver that, and there are not thousands of these people around. So, if we want to garner the best talent to deliver the best outcomes, a consequence of that is that generally the fees will tend to be slightly higher.
We do not think the regulator is pushing for fees to come down; it is not a price setter. We have very few conversations with clients about the level of fees. If you look at us as a house, why would on average our Sicav range be slightly more expensive than the peers?
It is down to the asset mix. A bigger proportion of our Sicav is in equities and a smaller proportion in fixed income. A lot of our peers are the other way round. They will have a big portion in fixed income and multi-asset, and a lower proportion in equities.
How is your distribution strategy evolving? Have you agreed any new partnerships in the past year?
We have evolved a lot in the past three years and one of the biggest areas of change has been to work more closely in partnership with some of the world’s global financial organisations, such as some of the biggest Swiss banks where we are on preferred partnership lists.
It means we work more collaboratively with the client. We have discussions about maybe designing products for their particular client’s needs, rather than just saying, ‘Here is one off the shelf. Can you go and buy that or sell it?’
We have struck up relationships with some of the networks in Italy. Previously, our Italian business was pretty much wholesale, selling into fund of funds and the asset allocators that worked at the private banks.
Now it is about 25% retail through networks such as Fineco, Mediolanum and Fideuram.
The old business was 100% equity and it is now 20% fixed income, 15% absolute return and the balance in equity. We have got three feet to stand on.
What used to happen to our business was that when equities were out of favour, 100% of the client money would go. When it was in favour, it would all come back in, so we had massive volatility of flows.
What tends to happen now is people are staying with Henderson, so they are moving from a European equity fund into a European long/short fund, for example. They are dipping out of a European investment-grade credit into a European high-yield credit fund, so our opportunities for keeping capital and keeping clients’ money are much greater than they were before.
In terms of our working relationship with the big global banks, we are doing well, somewhere in between 15 and 25 in terms of flows compared with our peers. The difference if you get from 15 into the top 10 is absolutely phenomenal.
Our job over the next two or three years, is to try and move to the top. That has been a great contributor to flows for us during the course of the past 12 months, not only the UK but across the globe.
