The challenges of putting F&C on the radar

Rob Thorpe joined F&C Asset Management in December with a successful transformation of Cazenove on his CV. He plans to put F&C, under new parent Bank of Montreal, on the market’s radar as a high-profile fund manager 

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F&C Asset Management found itself thrust into the spotlight at the start of the year when it was to be acquired by the Bank of Montreal for £708m.

The news followed a tough 2013 for the business, which suffered some £19bn of outflows after the loss of several strategic partnerships. At the time of the announcement that Canada’s fourth-largest bank had come in to acquire it, F&C revealed that its assets under management had fallen 11 per cent to £82.1bn in the fourth quarter of 2013, from £90.1bn in the third quarter.

The deal with BMO led to questions over how F&C would proceed, and one of the people hired to help answer these is the relatively new head of UK retail and wholesale, Rob Thorpe.

Having worked for nine years at Cazenove, where he became head of retail in July 2010, Thorpe departed after the firm was acquired by Schroders in July 2013. After a brief spell at Sarasin he joined F&C as head of consumer in December. Since the departure of John Yule his role has expanded to head of UK sales, covering both retail and wholesale markets.

When Cazenove offered him the challenge of building its UK retail presence in 2004, Thorpe had spent six years at Newton, establishing relationships with life companies and platforms. “I got to the point at Newton where I had taken things as far as we could and the Cazenove role presented a real challenge,” says Thorpe. “While Robin Minter-Kemp and Richard Pursglove had built its wholesale business to about £1.5bn in 18 months prior to when I joined them, the retail business had not grown to any great degree. 

“In the retail space [Cazenove] was still known more as a stockbroking and exclusive private wealth firm and my task was to help build them into a fund management business that the retail market was more comfortable to support.”

Nine years later, when Schroders acquired it, Cazenove was a top 10 retail fund management group. Thorpe views this success as down not only to great fund management but also to the willingness of the business to trust the people it hired to do its distribution and marketing without too much interference.

“F&C is a different type of challenge for me,” says Thorpe. “It is a well-established business and is known both in the institutional and retail markets but, because of a lot of activity at a corporate level, the business has been very inward facing.  

“I saw good products and areas that could be fixed quickly with good sales and distribution. I also saw a business that could not only compete but also lead in certain areas, but for whatever reason is not perceived in this way.”

For Thorpe, these areas are its European equities franchise, headed by David Moss, home to Mark Nichols’s F&C European Growth & Income and Sam Cosh’s European Small Cap funds. Then there is its multi-manager business headed by Gary Potter and Rob Burdett, which Thorpe says since the start of this year has enjoyed large inflows into its Lifestyle Range and Distribution funds.

“The Distribution fund will be ideal for the new annuities market next year. It has yielded some 5 per cent a year since launch, but if you had spent this your capital would have still grown in line with inflation, which I believe is the holy grail for income seekers and what everyone will be looking for next year.”

Thorpe also highlights F&C’s two property teams – the Reits team, which runs close to £7bn AUM, predominantly in investment trusts and Guy Glover’s open-ended fund, and the F&C property equities team, which is the former Thames River team headed by Marcus Phayre-Mudge. The TR Property Trust sits with this team, along with five open-ended strategies, including Real Estate Securities, which has recently entered the IMA Property Sector as part of a retail push.

“On entering the sector, it is top quintile over all time periods and as such will hit the radar of many wealth managers, analysts and advisers for the first time.”

Meanwhile, despite having launched Europe’s first ethical fund, Thorpe says the group also needs to reaffirm itself as the market leader in that space.

“So we have the products, and from a sales and distribution point of view there is a lot that we can do to increase the support and exposure of our business,” he says.

Since he joined on 4 December the retail sales team has been realigned and restructured to make it more focused in its approach, while the wholesale team has been restructured with the hiring of RWC’s Jon Bennett.

So how will things change under F&C’s new parent, BMO, after the deal completed in May?

“We are looking at what strategies existing within BMO would appeal to UK and European markets and – vice versa – what we have that would appeal to the broader BMO business.

“The Canadian market is both very similar but very different to the UK. They are going through their RDR (CRM2) in dropping commission from recommending products, so they are learning from us and our experiences to help educate Canadian advisers. 

“However, in the retail space, BMO have been operating outcome solutions/client outcomes for years, so we can educate and learn from each other.”

And what of the F&C brand? Thorpe says it is not straightforward decision. 

“There are some areas of the business such as the retail space where the F&C heritage is very important but other areas, like in the institutional space, where it is less important. BMO are sensitive to this and are in no rush to change and ultimately some areas might change and others won’t.”

Like any fund management business, Thorpe says, while it has areas that are performing well, other parts of the fund range are doing less so. He concedes that in the past the business has perhaps been too inward looking and reactive rather than proactive. He says this is changing and that if any underperformance cannot be justified then it has to be looked at.

Of the outflows of the past 12 months he says: “These were largely expected and well documented. But it highlights why any sensible asset management business should be diversified by product type and distribution, so while we have lost assets we are also growing assets and support in other areas of our business.”

Thorpe says any business that says it is not looking at the opportunities offered by the annuity changes is disingenuous. “Most fund management groups have been focused on the accumulation stage of a client’s lifecycle but with the majority of the wealth moving into the post-retirement market, how could you not be looking to enter this space?

“We already have solutions such as the Multi-Manager Distribution fund that are perfect and ready right now, we have heritage in providing solutions for the pensions market with our successful LDI business and it would be foolish not to be looking at other solutions.”

Profile

THE COMPANY

F&C Investments runs about £83bn in assets under management and as at 1 March employed 597 people. In May F&C became part of Bank of Montreal Global Asset Management, a global investment manager with more than $269bn in AUM as at December 2013.

 

INDEPENDENT VIEWS

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Simon Moore, director, head of research, Tilney Bestinvest

We like the property side of F&C but there is confusion over the teams. There is the real estate team based in Wigmore Sreet, where we invest in Richard Kirby’s F&C Commercial Property Trust, and the bricks and mortar team (run by Marcus Phayre-Mudge) in Hanover Street. We were a big supporter of Marcus’s Global Real Estate Securities fund but there could be an argument for sitting the two teams together. We are also a big supporter of F&C’s investment trusts, primarily the flagship Foreign & Colonial IT, which Jeremy Tigue recently retired from. We still use the fund and are doing work on new manager Paul Niven to establish how he runs money.

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Ryan Hughes, fund manager, Apollo

F&C are a group that have fallen a little bit off the radar in recent years. Ownership issues and a lack of real stand-out market-leading capabilities in any asset class have resulted in them losing some traction against other groups. This has come at a time when the RDR has in many ways played into the hands of the strongest groups where big, successful funds are getting prevalence. F&C’s smaller companies and fixed interest capabilities certainly have potential while the resolution of the ownership situation should hopefully put the firm on firmer footing to grow.

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John Husselbee, head of multi-asset, Liontrust

I have held a number of F&C funds in the past but at present I hold zero. There is experience and knowledge within the firm, I am just unsure of their current mindset and motivation. There is, rightly or wrongly, currently a perception of manager instability after a series of people leaving their roles. I understand a number of people, such as Jeremy Tigue, are retiring but it still raises questions. Property is the one rock of stability in the whole firm. For me it is their jewel in the crown.