Old Mutual’s decision to restructure its asset management into 12 boutique businesses, now called Old Mutual Investment Group SA, highlights the global trend towards specialised fund management as well as the company’s desire to shake its old-world life assurance label to become the leading investment and savings group in South Africa.
When Paul Hanratty took the helm last year, he created a new vision for Old Mutual, no doubt spurred on by the negative perceptions around the life industry at the time.
Globally, boutique houses have become all the rage, with star performing asset managers leaving large groups to go it alone. Large houses have been losing out to these boutiques as pension-fund trustees cherry-pick the best fund managers for a portion of the pie rather than handing it all to one house. So, for example, they may like one fund manager as a value investor, but pick another for his or her strength in fixed income.
Where it counts, Old Mutual’s fund managers can act like boutiques, making their own decisions about investments, managing their own budgets and having a profit share, while at the same time leveraging off the company’s massive in-house research team and administrative systems, thereby cutting costs.
The fund managers are required to invest their money in their own fund and can put a cap on the assets they will manage, something the fund managers of the Select Equity Investments boutique have chosen to do.
Boutique houses have proven a success in the United States, where the strategy was implemented at United Asset Managers. The company was acquired in 2000 with $1,6-billion in assets and was turned into 19 boutiques with a total asset base of $237-billion and top quartile performance from the boutiques.
On paper, it seems a clever move. But, of course, for Old Mutual the proof will be in the performance.