Your links with IFAs are essentially via platforms. Do you have any plans to cultivate them directly?
In the UK, we have an advisory salesforce that deals with financial advisers and the platforms, and increasingly the ratings agencies, which are creating guided architecture solutions for the advisory networks and clients.
Outside the UK, it is the banks driving the platforms rather than the platforms driving everything. They sell their best-of-breed global fund management funds to individuals in, for example, Mexico and Brazil. We go and do the roadshows with them. For us, that is great, because we are alongside nine other global asset managers.
Most of the business we do is intermediated. We do not do any direct business outside of the UK.
Which geographical sales markets have become more important to you over the past year?
Latin America, Spain and Italy. Within Latin America, it is the pension funds in Chile and Peru, and it is the US offshore segment in Miami and New York.
You told International Adviser in October 2013 that the management of Henderson’s global equity team had changed in 2012 and that it would take two years to get serious traction in terms of performance. What is the update?
To be honest, we have not delivered the investment performance we would have liked to in a consistent way. We had a great first year, a really poor second year and a reasonable third year.
We have ended up just above the middle of the pack over three years. We got some early wins from some institutional clients in the US. We created a new product and registered it in Australia, which is a big institutional market that demands global equities because they are full up with domestic equities and fixed income. The pension system has outgrown the Aussie market and they are looking to gain exposure to global equities and to global fixed-income solutions, which is the same thing, on a much smaller scale, in Chile and Peru.
The local markets in Chile and Peru are much smaller than the Aussie markets but the pension systems have outgrown those markets and they are looking to diversify. So, we are benefiting from that spillover.
We also benefit particularly in Australia because about two-thirds of our shareholders are Australian.
We have dual listing in Australia, in Sydney and in London, which harks back to the old days when Henderson used to be owned by AMP. Then it was re-listed on the stock market and ended up with two-thirds of the shareholders in Australia.
As a result of that shareholding, we decided, about three years ago, to start building an Australian business, and we have just concluded the deal to buy an Aussie equities and fixed-income boutique.
You also said Henderson needed to add resource to global fixed income. Where has that got to?
In January 2013, we hired a team from Delaware Asset Management in Philadelphia, who are US high-yield specialists.
High yield has not been a great place to be in terms of new flows but what we have done is to build a very solid track record in both US high yield and a US mutual fund strategy, which has got a three-year track record coming up in April.
We launched a global high-yield fund in our Sicav, also run by the same team and the credit team here, which we launched in November 2013. That will have a three-year track record this November.
People know we have the capability, they are just not allocating to high yield at the moment. What we do have is a very credible record being built. Another addition to that is emerging market credit, where we started building a team a year and a half ago. We launched a Sicav via Steve Drew, who is ex-Thames River Capital, in November 2014.
As a business, we have tried to be counter-cyclical, to invest in strategies that we think will be more popular in three to five years’ time, rather than really popular today.
Finally, can you give me your overall plans and any specific predictions on where Henderson is heading next?
We went to shareholders in December 2013, and set out our plan to build our business around five pillars, which are European equities, multi-asset, global fixed income, global equities and absolute return.
This also covered our goal to globalise a UK-heavy business that has some good investment skill, which you cannot do by just flicking a switch.
Part of that evolution is dealing more closely with global clients and your business model will more quickly adapt to theirs.
We are above market growth in terms of net flows, which are rocking along at around 11% a year.
In our plan, we assumed that markets would grow between 2% and 4% – depending on whether you are looking at fixed income or equities – and that we would make a little acquisition which would get us 5% in organic growth on top of that.
If all of those things happen then you can get from $62bn to $124bn in AUM in five years, just by the compounding effect.
Our scorecard shows we are ahead of market growth on our net flows, which are around 11% a year.
We are behind on market returns, because the market is at a three-and-a-half-year low (12 February). We do not need to make further acquisitions to get to our target.
We need to continue on that trend of above-market net new money growth, and we have a number of tools that will enable us to do that – calamities aside.
