The senate group   an introduction to met premium partners (27.6.2014)
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  • 1. 1 Kevin Hinton Head: Distribution and Client Services 27 June 2014
  • 2. 2 met collective investments Agenda 1. Trends in the asset management industry and role of the ‘smaller/boutique’ investment manager in portfolio construction 2. Introducing our partners and their unique value proposition
  • 3. 3 met collective investments Bifurcation – “Cheap” Beta and “Hunt for Alpha” Revenue margins2005 Size ($x T) Below average growth Above average growth Source: National statistics, BCG analysis, Morgan Stanley Research. Projections 2005-2010. 10bp 30bp 40bp 50bp 100bp 200bp20bp Index funds 4.7 Active bonds 13.2 Active equities 16.2 Structured products 0.6 Quantitative products 0.4 Private Equity 1.5 Hedge Funds 1.2 Innovative productsTraditional products Market Tracking Money Market 6.7 B C Real estate 1.3ETF 0.3 A
  • 4. 4 met collective investments Active managers becoming a scarce breed
  • 5. 5 met collective investments The asset management barbell Polarisation of cheap beta and difficult/expensive alpha
  • 6. 6 met collective investments Background to the rise of boutiques • Significant growth in global AUM of the asset management industry • Regulations such as the Dodd-Frank Act – traders spun out of banks • Top performers at large investment managers want more freedom to implement their ideas • Growing sophistication in investor base • Expertise within niche markets • According to David Swenson (ex CIO of Yale University endowment) – “Owner operators simply work harder and better than rank-and-file employees and that small, independent, entrepreneurial organisations provide greater alignment of interest between firm and client.”
  • 7. 7 met collective investmentsSource: Sungard Asset Arena 360 Boutique Definition Heatmap (by region) Entrepreneuralism Niche Focus Investment Team Ownership Small Staff Less than $10b AUM Specialised Products US Europe Asia Pacific Latin & South America Middle East & Africa Canada All Bright green indicates most popular term. Orange represent least popular term. Colour determined by popularity within each region
  • 8. 8 met collective investments Rise of boutiques… the global experience Source: Lipper, a Thompson Reuter Company (Legend indicates size of funds)
  • 9. 9 met collective investments The rise of SA boutiques, growing in line with CIS equity trends and capturing even greater proportion 0 20 40 60 80 100 120 140 160 180 200 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Numberofunds %ofinvestmentmanageruniverse Total no. of large institutional managers No. of boutiques Total no. of funds Source: ASISA statistics for SA collective investment schemes
  • 10. 10 met collective investments The value proposition of boutiques over larger, institutional peers -5% -4% -3% -2% -1% 0% 1% 2% Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Rolling 3 years excess returns of SA General Equity Funds (net of fees) Average Bank, life assurer owned Average Boutique managersLarge Institutional Managers Source: Morningstar data & Momentum Manager of Managers research
  • 11. 11 met collective investments Median rolling yearly excess returns of Australian equity managers Institutional Boutique Source: Russell Investments. Past performance is not a guide to future performance
  • 12. 12 met collective investments Key factors behind the global boutique boom 2% 19% 20% 22% 45% 52% 61% 63% 66% 76% 0% 10% 20% 30% 40% 50% 60% 70% 80% Other Investor distrust of larger firms Uniqueness of investment research Investors looking for diversification Agility Client service Focus on one investment strategy Active management vs benchmark tracking Pure and simple - performance Talent Source: Sungard Asset Arena 360 industry report: THE GROWTH OF INVESTMENT BOUTIQUES: David versus Goliath (2012)
  • 13. 13 met collective investments Boutique characteristics in South Africa Type Description Example Independent Group as a stand-alone firm Part of large firm Acquired by larger investment managers Multi-boutique / best of breed • Collection of boutiques • Own investment procedures and brands Own brand Brand of the manco
  • 14. 14 met collective investments Global practices Wells Fargo Investment Management
  • 15. 15 met collective investments Global practices New York Life
  • 16. 16 met collective investments Imqubator seeding new investment managers
  • 17. 17 met collective investments Levers by asset management business models VALUE PROPOSITION ORGANISATIONAL MODEL KEY LEVERS 1 α HUNTERS (Multi-)boutiques  Ability to manage complexity  Specialised investment expertise 2 TRUSTED ADVISORS Partnerships of advisors  Independence  Client understanding 3 β GAZERS Large independent investment managers  Branding power  Economies of scale 4 DEMAND EXPERTS Asset management units of banks/insurers  Group brand and distribution channels  Product innovation Source: Roland Berger Strategy Consultants
  • 18. 18 met collective investments Introducing the MET Premium PartnersTM concept
  • 19. 19 met collective investments MET Premium PartnersTM objective Help develop the advisory and investment management industry in South Africa through skilled advice, efficient administration and meaningful distribution – in a cost-effective way But it’s about quality and not quantity
  • 20. 20 met collective investments Our objective • We aim to position and promote “Growing Tomorrow’s Leaders TodayTM” and “MET Premium PartnersTM” within the broader retail financial services industry • We align with and seek partners that: • We have identified as offering quality investment management skills • That have specific skills in areas that we want to complement our “Premium Partners” and universe composition across different strategies and styles • Have a high degree of management independence and want to retain their own brand • Have undergone rigorous research by Momentum Manager of Managers and have therefore received our stamp of approval
  • 21. 21 met collective investments How MET Collective Investments is supporting boutiques • Increased visibility and scale • Fund administration and compliance via the MetCI licence • Letting good investment managers concentrate on managing alpha • Backing of MMI’s balance sheet • e-Commerce strategies • ‘Core’ pricing on the Momentum Wealth Platform
  • 22. 22 met collective investments Managers undergo vigorous research by Momentum Manager of Managers Assets under management R318 billion (>R500bn group assets) Staff 170 Investment team 23 (+ 14 London office) Years in manager research 19 Years in multi-manager investments 19 Investment portfolios 200+ Parent company (MMI Group) AA Fitch rated Measure Our numbers Manager of Managers of the year 2013
  • 23. 23 met collective investments MET Premium Partners TM
  • 24. 24 met collective investments Diverse investment opportunities for growth investing Category Partners Active equity Value Quality Specialiststrategies
  • 25. 25 met collective investments Diverse investment opportunitiesSpecialiststrategies Category Partners Passive/Smart beta Category Partners Property
  • 26. 26 met collective investments Diverse investment opportunities for retirement planning Category Partners Balanced Flexible asset allocation High equity Medium equity Low equity Income Specialiststrategies
  • 27. 27 met collective investments Diverse investment opportunities Category Partners Income Flexible Bonds Money market Specialiststrategies
  • 28. 28 met collective investments Keybenefitstofinancialadvisors
  • 29. 29 met collective investments If your investment boutique were a car, which one would it be? Car Representation Solid track record Mid-market consistency supported by quality engineering Stable returns High performance in a well-defined niche Provides protection and performance in tough markets Focus on green credentials and sustainability Old school investment manager for old money Good value for a standard product Source: Sungard Asset Arena 360    
  • 30. 31 met collective investments Web-app (PC, iPad and android) • Manager information (fund fact sheets) • Manager research (Momentum Manager of Managers) • Thought leadership articles • Community gateway • Forms • podcasts
  • 31. 32 met collective investments Thank you
  • 32. 33 met collective investments Disclaimer
  • 33. 34 met collective investments How boutiques define boutiques 53% 52% 48% 47% 42% 33% 31% 0% 10% 20% 30% 40% 50% 60% Entrepreneurialism Niche focus Small staff (>100 FTEs) Investment Team Ownerhsip Focus on Core Competency Manageable AUM (>$10b) Highly Specialised Products Source: Sungard Asset Arena 360
  • 34. 35 met collective investments The rise and rise of boutique investment managers Australian experience Source: Russell Investments