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Investment views

In conversation with John Green, CEO designate - Taking Stock Winter 2018

17 July 2018

By John Green, CEO designate

 

In October this year, John Green, Global Head of Client Group, and Mimi Ferrini, Co-Chief Investment Officer, will take over the reins from Hendrik du Toit as he steps up to lead Investec Group globally. We spoke to John to get his views on the future of Investec Asset Management, our industry and the role of active management.

Congratulations on your and Mimi’s appointment. We’re increasingly seeing joint leadership in financial services firms. What benefits do you think it will bring to Investec Asset Management?

Firstly, I want to say that I’m very excited about working so closely with Mimi. We have developed a very strong bond over the last 17 years, with Mimi leading the investment side of our business and me on the client side. Hendrik is unique in that he is both a skilled fund manager and a salesperson and in any investment management business that combination is really important. With the transition we believed it was critical we ensure that balance in the new leadership.

 

Intellectual capital businesses are led by discussion and debate.

 

We are an intellectual capital business and such businesses are not led in a dictatorial way from the top by a single individual taking a view and making sure everybody implements it. Intellectual capital businesses are led by discussion and debate and then reaching consensus on the key issues and getting the organisation to align behind that. In those circumstances, joint leadership is actually very productive, particularly if it represents different parts of the business.

It’s quite daunting for you and Mimi to take over from Hendrik. He is the founder and CEO and has been running this business for 27 years. He is an industry-leading figure in South Africa and, increasingly, on the global stage. What do you think your biggest challenges are going to be, and what excites you most about the future?

Yes, we do have big shoes to fill, but we believe the leadership transition creates a lot of opportunity inside Investec Asset Management. For the last fifteen years we have been very stable – in our organisation, in our structures and in our leadership. All of this is now set to change, and that is going to release a massive amount of energy and activity and we believe it is going to create a lot of positive momentum in the business.

Also, while Hendrik will leave a gap, let’s remember that he’s not going far. The Investec Group has been very clear that developing capital-light businesses is a very important strategic initiative. Investec Asset Management is at the heart of this initiative, so Hendrik will stay very close to what we do and I have no doubt that I will continue to get my 7 am phone call from him well into the future!

Remind us why the South African business is important to you.

Firstly, our roots are here. It’s great not to walk into a meeting, shake hands and say, ‘‘I’m John Green from Investec” and they say, “Who is Investec? Do you mean Invesco?”

On a more serious note, one of the key differentiators we have when talking to a global client base is that we come from somewhere different. We bring an entirely different perspective and we follow a different formula. So when you are competing for a global equity mandate from a massive global pension fund or sovereign wealth fund and you’re up against 500 other managers with top quartile performance, how do you stand out? Well, we stand out because we present ourselves as different. The zebra helps for sure, but our position and our standing in our domestic market is key. So our success outside is dependent on our continued success here in our home market.

 

We bring an entirely different perspective and we follow a different formula.

 

Is it possible to run a global asset management business out of Cape Town or should you also be in London?

I believe that being in an environment that is not dominated by any one single global market will be important in the future. Big US managers are dominated by their home market; big UK managers are dominated by their home market. If I go and sit in London, I am going to be dominated by what the people in London think. I don’t want that to be the case.

Furthermore, we have the balance of Mimi being based in London and me in Cape Town, in our two ‘home’ markets. I will continue to remain very close to our South African business, but will obviously spend a lot of time on the road, as I have been doing over the last decade.

 

Being in an environment that is not dominated by any one single global market will be important in the future.

 

You emphasise the importance of SA in our future. What about other regions like the US and Europe?

We’re very excited about the potential for both. North America has the biggest third party asset pool – three times the size of its nearest competitor, which is the UK and Europe combined. We have nearly doubled our New York office to roughly 40 people in the last two years, including some investment professionals. There is enormous potential in the US and if we get it right in the next five years we can double the size of the firm.

In Europe, we’re also just beginning to scratch the surface. The European markets vary greatly, so we are targeting a mix of prospects. In Northern Europe we deal mostly with institutions who predominantly buy fixed income products and in Southern Europe we partner mainly with wholesale intermediary channels who buy a lot of specialist and multi-asset products. We see our multi-asset strategies playing a really important role in our growth in Europe and believe we can double or even triple our assets from the region in the next five years.

In short, I’m extremely excited about the future!

Finally, Investec Asset Management is a proudly active manager. What’s your take on the active versus passive debate?

Around two years ago we were debating whether we would be wiped out by the move to passive. However, what I believe has happened is that the demand for passive products has found an equilibrium. For me, there is no better indication of that than the fact that the passives are starting to fight each other on price. Indeed, we’re actually seeing much more price pressure in the passive world than in the active world.

I believe what you will see is active managers taking more risk and focusing much more clearly on skill, and I think that will ultimately be better for investors as it means that they will be getting better outcomes. Those active managers that don’t deliver will be left high and dry.

An industry development also playing into the hands of active managers, is the fact that outcome strategies are becoming increasingly in demand in both the advisor and institutional community. What does this mean? An outcome strategy is not a benchmark-relative product. To illustrate, a good example of an outcome is an investor who wants an income of 5% and does not want to lose value over any 12-month period, or an investor needing as close to equity returns as possible at half the volatility.

Passive strategies simply can’t replicate an outcome. This has resulted in a new lease on life for active managers, which we have started to see in our flows.

 


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All information and opinions provided are of a general nature and are not intended to address the circumstances of any particular individual or entity. We are not acting and do not purport to act in any way as an adviser or in a fiduciary capacity. No one should act upon such information or opinion without appropriate professional advice after a thorough examination of a particular situation. We endeavour to provide accurate and timely information but we make no representation or warranty, express or implied, with respect to the correctness, accuracy or completeness of the information and opinions. We do not undertake to update, modify or amend the information on a frequent basis or to advise any person if such information subsequently becomes inaccurate. Fluctuations or movements in exchange rates may cause the value of underlying international investments to go up or down. Any representation or opinion is provided for information purposes only. This is the copyright of Investec and its contents may not be re-used without Investec’s prior permission. Investec Asset Management is an authorised financial services provider. Issued by Investec Asset Management, July 2018.

 

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