It’s been five years since Fernando Ribeiro left Lisbon to join F&C in London, but he still doesn’t like the way coffee is served in England. Professionally, however, this very private Portuguese man hasn’t had any problems adapting to the challenges of heading different investment divisions within the company. First, it was the retail portfolio management business, then the insurance area and, more recently, the alternative investment division.
But in November last year, Mr Ribeiro accepted the largest challenge of all by becoming head of investments, and therefore responsible for the whole investment portfolio of F&C, replacing former chief investment officer (CIO) Tony Broccardo.
New systems
This appointment wasn’t just about replacing someone, but more about introducing a new way of running the investment teams, says Mr Ribeiro. The first clue to understanding the changes in the company is to be found in Mr Ribeiro’s job title: head of investments, rather than CIO.
“I’ve always been on the management committee of the firm and I’ve always had a good understanding of the company and its business,” Mr Ribeiro says. After the merger with Isis, it became clear that an investment division with more than 160 professionals needed dedicated business management because “it is a business within a business”. This way the traditional CIO position, purely focused on investment skills was no longer what the company needed.
“There is a need for management of talent – retaining and attracting talent – and this was the reason why we reviewed this role as a business one,” Mr Ribeiro says.
“It is not that I am not taking the ultimate responsibility for the performance of the company, but what we want to do is to improve the management of the investment division and, in the end, the quality of results for our clients.”
For Mr Ribeiro, the main difference between his role and that of a traditional CIO is the larger degree of independence the company’s fund managers will have when it comes to making investment decisions. Whereas before all the investment desks reported to the CIO, now there is a much more defined management team for the investment division, considerably reducing the number of people reporting directly to Mr Ribeiro.
“There is a word that I like very much in English which has no direct translation in my language and that is accountability,” he comments. “Our teams and those reporting to me will be empowered, encouraged and motivated to make decisions and we expect this will lead to improvements in the way we manage portfolios.”
Better results and happier clients will ultimately lead to further organic growth, which is one of the firm’s ambitions.
In order to improve communication between the firm’s investment professionals, an investment division management team has been created to allow fund managers to share concerns and successes more effectively “This is not a forum to discuss investments but the needs of investment divisions,” he says. On top of that, there is an investment and asset allocation committee and a global tactical asset allocation (GTAA) committee.
Although it is still early days to evaluate the impact of these organisational changes, the truth is that they are in line with the changes the new chief executive, Alain Grisay, wants to implement in order to take the company forward.
Mr Ribeiro claims that clients have approved of the restructuring. He explains: “Clients have been supportive of the move in the sense that they understand that a larger company, with a broader range of products and business lines, also needs to upgrade the management of its investment division.”
According to figures published last month, total assets under management stood at €190.7bn at the end of 2005. From this, a total of €115.2bn came from insurance funds, followed by €50.4bn from institutional funds.
In terms of asset classes, fixed income still represents the bulk of the firm’s investments (€106bn), compared to the €65.8bn assets under management in equities.
Areas of specialism
Today, F&C offers investment products across all different asset classes. But there are two areas that are closely associated with the company or, as Mr Ribeiro puts it, “are part of our DNA”.
The first is a special interest in emerging markets equity, which goes back to the origins of Foreign & Colonial. Despite this long tradition, performance of the asset class has recently gone through a bad patch, and Mr Ribeiro expects that recent additions to the division will result in better results. “My first job as head of investment was to appoint a new head for emerging markets,” he says. “We want to make sure performance gets back on track, so we not only retain but enlarge our client base and also upgrade the quality of delivery.”
The other area Mr Ribeiro refers to is governance and socially responsible investment. This is an important part of F&C’s investment proposition since the merger with Isis, which as part of Friends Provident was a pioneer in socially responsible investment.
Other areas where the company has been trying to expand its capabilities include specific strategies in equities, fixed income and alternatives.
On the equity side, apart from boosting the emerging market division, F&C recently managed to attract five UK equity managers from Deutsche Asset Management. At the end of last year, assets under management in UK equity amounted to €28.2bn.
Emerging market debt is one of the products in which the company has been able to remain competitive and the team continues to expand. F&C has also experienced growth in other asset classes such as high yield and corporate bonds.
Another of the firm’s ambitions is to increase its presence in the alternative investments area. Mr Ribeiro, who was previously head of alternative investments for the company, believes that the increasing demand for these products from institutional investors means small hedge fund boutiques, for instance, will find it harder to compete with large asset management houses.
“As a firm we didn’t move into alternatives for the sake of moving. It was both a defensive and an offensive move,” he says. It was “defensive”, because the firm wanted to cater for clients’ needs and demand for alternative investment products was increasing, and “offensive”, because F&C wanted to expand its client base.
“The biggest source of assets [in alternative asset classes] will now come from the institutional space and institutional investors want a robust platform, robust controls and to work with a company that has been around for some time,” he explains. “We have that in the sense that we have been in existence for 137 years and our reputation and good name are our most valuable assets.”
In order to boost its presence in the alternatives segment, F&C has put an infrastructure in place with dedicated business support for hedge funds, and offers both funds of funds and single fund strategies.
“Since my appointment was made public I have come across several industry professionals interested in joining us,” he comments. “I think that launching [hedge fund] boutiques these days is much more difficult than it was five or 10 years ago, especially because the institutional marketplace will now be a major driver for growth. They want to see proper governance and control systems in place before they invest and that’s why we’ve been able to attract a fund of funds team.”
Institutional investors, and in many cases new regulations coming into force, are the main drivers of change and growth in the asset management industry.
The current trend among pension funds and other institutions toward adopting asset liability modelling (ALM) programmes or liability-driven investment (LDI) strategies has resulted in asset management firms developing different solutions to help investors to bridge the gap between shrinking funding levels and increasing liabilities. Prior to his appointment as head of investments, Mr Ribeiro was responsible for setting up and developing the ALM/LDI group at F&C.
“We formalised the ALM desk back in early 2005. We could see this trend in the market and we wanted to be a step ahead and I think with the number of professionals we have in ALM we are probably one of the better resourced companies in this market,” he explains. “We have been working in different jurisdictions and we have implemented strategies in two of the countries that are at the forefront of the thinking in these issues, the UK and the Netherlands.” In the Netherlands, for instance, F&C has recently launched the first family of LDI investment products targeting the particular requirements of Dutch investors.
Mr Ribeiro notes that even though many tend to see ALM and LDI as the same thing, this is not necessarily true. “LDI is more the interest rate hedging type of work obviously looking at liability and asset duration. ALM is the bigger picture that may include modelling of the best strategies and solutions for a client.”
Going forward, F&C will focus on continuing to expand its product range, improving performance and extending its international client base. “Our ambition, as recently stated by our chief executive Alain Grisay, is to be a top quartile company, and we may need to upgrade in certain areas. Upgrading doesn’t necessarily mean increasing the number of resources. It may means doing things in a better way,” he says, adding that he doesn’t expect the a significant change in the overall figure of investment professionals. “Ours is not a ‘one size fits all’ business. We still do things in a way that gives tailor-made solutions to our clients.”
FERNANDO RIBEIRO: THE PATH TO BECOMING HEAD OF INVESTMENT
MBA and degree in Economics from the New University of Lisbon
CIO, AF Investimentos
2001 – Joins F&C as a member of the management committee with responsibility for retail portfolio management.
2002 – Responsible for building the insurance team
2003 – He becomes head of alternative investments
2005 – takes responsibility for settig up the ALM/LDI group
2005 – Becomes head of investments.
|
