Good timing restores faith in group

The rebranding of a life assurance group’s retail business has proved an astute move thus far, as clients embrace a specialised focus and a former manager returns, writes Shaun Cumming.

Andrew Fleming, the chief executive of Kames Capital, completed one of the most daunting challenges of his career in 2011 when he oversaw the firm’s rebranding from Aegon. Rebranding, according to Fleming, is simply not something large financial services firms do that often.

And yet there was good reason for the move. Being associated with such a respected international name may be considered a good thing – especially as Aegon has long been associated as a safe, stable financial services brand.

But the negative side, as Fleming explains, is that for the retail asset management industry in particular, investors are often sceptical of how serious a group is if it operates as an offshoot of an insurance firm.

There are recent examples of how this could be playing out in the industry. Last year, LV= Asset Management announced that it would offload its retail fund range to Threadneedle. (Focus continues below)

The latest to make the move was Aviva, which announced earlier this month it plans to significantly scale back its retail distribution capabilities.

And this is a trend people at Aegon had observed early. The asset management firm’s rebranding to Kames, although planned since 2010, perhaps came just at the
right time.

“Because the [retail] industry is so competitive, the marketplace is sceptical about insurance companies being able to be competitive,” Fleming says. “What the case of LV= and Aviva tells you is that you either do it properly, or don’t do it.

He says: “I was convinced it was the right thing to do. But you never know when you make a decision like this in terms of how it will work out. But we are absolutely overwhelmed with the positive response. It has been absolutely fantastic.”

Fleming has some hard data that backs up his claims. “For example, looking at external traffic to our website, it is up 55% year-on-year each month since the rebranding and we have record inflows. It really seems to have caught peoples imagination.”

It was a decision made not only because of marketplace changes and retail investor attitudes to insurance companies, but also because of careful analysis and facts, according to Fleming.

While permission for the rebrand was granted in December 2010, it was not implemented until July 2011. Fleming is particularly happy with the execution, especially considering that nobody at the firm had any experience of rebranding an organisation.

He adds: “I was conscious of the risk. It is a bold statement to the marketplace that we are a serious asset management company. Aegon remains our largest client and we have a very good relationship with them. It is a big world out there in terms of fund platforms.

“We have to compete with lots of other fund managers – there is very little soft business these days. In this kind of world, it is important that we have an identity as a first class asset management company.”

There is much more to a rebranding exercise in asset management than a new name and logo. Communication has to be a priority as clients learn who will be involved in their investments. Importantly, the company must have a unique selling point and a clear indication of what its specialities are. It must also know what its clients want.

Fleming says: “We have listened to clients, and have been open and honest. This was deliberate.

“All fund managers suffer periods where performance is not as good. We had one of those periods in 2008. Our reaction was to over-communicate with clients.

“Lots of people would put up barriers in this scenario. When performance comes back people understand how it has been improved. We can honestly say this is an organisation that is open even if performance is poor,” he says.

Fleming’s aim is to concentrate on a few areas of the market, rather than having every type of product available. The four areas he says are key for the firm are fixed income, British equities, property, and multi asset.

“The next thing we try to do is be innovative,” he adds, referring to the slew of funds Kames has produced over the past couple of years. But he says he does not want the firm to be known for launches for the sake of it.

”Stephen Snowden left us and was sceptical of the organisation at the time, but he has been really positively surprised by the progress made”

“I think we have done a lot over the last two years. We have a pretty full product offering range, so we need to focus on doing a good job with the existing funds. We do not want to be known as a serial launcher.”

He says product innovation will slow down, without stopping all together. “It is not about launching funds that are flavour of the month. I think our rate of launches will slow down,” he says. “One area where we might continue to have ideas is income, because there is still a need for people to get income.”

One of the more high-profile launches of 2011 was the announcement of the Kames Absolute Return fund, to be managed by Stephen Snowden. This was an interesting move, because Snowden had previously worked at the firm under its Aegon branding in 2003.

“We re-hired Stephen Snowden, which is significant,” Fleming says. “He left us and was sceptical of the organisation at the time, but he has been really positively surprised by the progress made. He is an outstanding credit grade manager.

“The great strengths of fixed income [at Kames] is that it is a strong team throughout but with strong final decision making. So there are lots of ideas, challenges, which is important, but strong people making final decisions. I think [the team] is as good as you can get,” he adds.

Fixed income is indeed an area that intermediaries recognise as a particular strength of the group. Darius McDermott, the managing director of Chelsea Financial Services, says: “They are good on the fixed income side. They also have an interesting ethical offering.”

The reasons for rebranding were clear, McDermott says. “I can see why they did it. They wanted to get away from the life assurance name under Aegon and show they were independent. It seems to have worked well, with a lot of people taking notice,” he adds.

While many of the firm’s funds do not yet have a three-year track record, those which do, overall, display strong performance.

Over three years to March 16, five funds were top quartile performers, five were third quartile, and three were fourth quartile, according to Morningstar.

While performance helps to reintroduce Kames as a standalone in the retail market, Fleming must continue to communicate the message of what the company can do for investors.

With a strong team already in place and all the required infrastructure, Fleming says the plan is to grow organically. “I think I would say Kames is consistent, open, and focused.

Those are three words I would choose,” he says. “Consistent because we do what we say, open because we communicate what we do, and focused because we want to do our few things well.”

Kames Capital can trace its history back to 1831 when it first operated as Scottish Equitable Life Assurance Society, before Aegon took over in 1994. It rebranded to Kames Capital in 2011 and has assets under management of £49 billion as at December 2011.