When a mega-merger like one the size of Standard Life Aberdeen happens, it should not come as a surprise when some staff are not entirely enthusiastic about it.
That is why firms like Investec Asset Management have been happy to open the doors to many of those who found themselves in the middle of such a major management and cultural shake-up.
UK managing director of the 27-year old South Africa-born fund house David Aird says he is much more interested in watching the consolidation in the asset management industry unravel than jumping into it.
He says: “We have no intention of buying anybody or being acquired. We are part of the Investec Group and a significant contributor to it. We are in complete control of our destiny.
“We are seeing a lot of people [from the groups that are merging] come to our door and have coffee with us – from senior management, client-facing people and fund managers. They say either the culture is changing, that they have a new boss they didn’t know the week before or that nobody can give them confidence this is going to work.”
With £105bn in assets under management and 1,000 employees worldwide, the plan for Investec is to nurture talent and push for organic growth.
Aird, who has been building Investec in the UK from scratch over the past 18 years, says: “Looking back in history, which mergers and acquisitions have been very good for the end investors in the fund or company? Companies generally merge to survive, so you keep shareholders happy.
“But does all the de-focus, complexity, politics and clash of structure benefit the end investor? Very rarely. We stay away from that M&A growth. We really like organic growth, but it is slow and it is tough.”
Investec is not just luring talent from larger fund groups, it is also attracting their money. The asset manager says it is picking up flows from some of the largest fund houses in the market, in particular from their absolute return strategies. It enjoyed “significant” inflows into its multi-asset strategies during 2017, where its flagship Diversified Income fund nearly doubled in size to its current £467m, according to FE data.
Aird says: “We have had 10 years of positive inflows, which gives the business a huge amount of momentum and gives people a lot of confidence. When your firm has constant outflows, it has a debilitating effect on you.”
Aird assuredly puts Investec in “the middle ground” between the behemoth fund houses and the boutique firms.
“A lot of people think the middle ground is lost ground. I would argue very energetically that the middle ground is perfect if you are structured greatly.”
The fund offering at Investec, which at launch specialised in emerging markets only, now includes a wide range of active strategies, from UK equity income to multi-asset credit and emerging market debt.
Will the asset manager consider launching a passive offering? Not on Aird’s watch. Its multi-asset team only uses passive funds to achieve “cheap beta”. “I am fiercely proud of active management,” he says.“Nobody ever writes a story on how much money some of the very good fund managers make for their clients. I get frustrated about that.
“If you look at the Investment Association numbers, passive assets only account for 20 per cent of the total market. So the flows [into passives] are high but the total market share is still dominated by active investors.
“Anyone can perform in a bull market in real returns, but volatility will show investors passives are not the nirvana of investing.”
On his future at the company, Aird says it is almost a custom for senior management to organise succession planning. That said, he cemented his intention to grow the business by securing a minority stake in 2014, following a “small” management buyout in which the leadership acquired 15 per cent. The buyout can increase by 1 per cent every year to 20 per cent.
“Because it is a minority stake, there is no plan to exit the business. This has provided an additional layer of stability [for the business] as long as we perform well and better.”
The challenge of improving the business is made even tougher under the burden of weighty regulations coming from Europe. Aird accepts the need for regulation but warns regulators still fail to distinguish the different roles that banks and asset managers hold in society.
He says: “The regulation born out of the financial crisis was ill-designed for wealth and asset managers. When regulation comes to the asset management industry, which is more designed for the banking industry, that is where we must stand up.
“We must talk to the regulator and tell it the differences between asset managers and banks. That is not to say we don’t need regulation. We need tough regulation as an industry.”
Investec had been engaging with trade bodies and regulators on reforming fund charges and performance fees way before the advent of Mifid II.
Five years ago, in order to make charges more transparent, it introduced a “general administration charge” of 8 basis points, which brings together all the additional expenses of a fund, keeping it separate from the total expenses ratio or ongoing charges figure. “We were one of the first companies to go to the market with this and we are still doing it now.”
As for other improvements, Aird admits Investec is among the many firms in the City that significantly lack a fairer gender diversity in the most senior roles.
Investec AM chief operating officer Kim McFarland is the only senior female out of five global executives.
“If we are not good enough on diversity, we might miss an opportunity. Clients demand this, especially big pension schemes.”
What’s the best bit of advice you’ve received in your career?
Irrespective of your background, if you have confidence in your ability, if you treat everyone with respect and you harness your inner drive and you work hard and be optimistic, you’ll surprise yourself with how much you can achieve.
What keeps you awake at night?
Thinking about my kids.
What has had the most significant impact on financial advice in the past year?
If I was in charge of the FCA for a day I would…?
I would make sure that broad brush regulation is prevented and that specific regulation for the subset of financial services is rolled out.
Any advice for new advisers? Continually learn and improve yourself and be incredibly proud of what you do.
2000-present: Managing director, UK, Investec Asset Management
1999-2000: Hedge fund sales, Gartmore Asset Management
1993-1999: Director, head of institutional pooled sales in the UK and offshore areas, Fleming Asset Management