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The cultural Resolution

Please give a warm welcome to Clive Cowdery, said OBSR’s managing director Richard Downs as he introduced the evening’s keynote speaker. “If for no other reason than he might soon be your boss.” The audience of fund managers and other investment industry types at the third annual OBSR Honours for Excellence in Investment all laughed – some more nervously than others.

The chairman of Resolution was there to offer a corporate investor’s view of what is driv-ing change in the financial services industry and this came in three parts – why the industry needs to be restruc-tured, who should lead the process and what it means for asset managers and life companies.

A restructured industry was necessary, Cowdery argued, because at present it is not possible for fund managers “coolly and rationally” to allocate capital to the securities of financial services companies as their behaviour is too unpredictable. “There will always be a place for boutiques in this business,” he added. “But, broadly speaking, smaller businesses are just a decision to fail slowly.”

Always good to hear that sort of thing just months after setting up one’s first-ever limited company although I am hopeful that the remark was not really aimed at me. Anyway, in Cowdery’s opinion, any restructuring of the industry should be led by fund managers. “Private equity, vultures and other sources of capital cannot be allowed to capture the restructuring gains,” he said. “However, we must have investable stock, where it is clear who the natural owner is.”

Moving onto what this means for asset managers and the rest of the sector, Cowdery foresees two camps forming, the first comprising those who want to resist the arrival of change. “That stance paints us in the same light as the people who caused the issue in the first place,” he said. “It is an unhelpful route for any of us.”

Cowdery described the second camp as “accelerators”, adding: “These are the people who say change is going to happen, it will happen over the next period of my career and so I am going to position myself to take part. Fear is generally a pretty poor path to take to fashion a career.”

Here Cowdery took the path of quoting Chairman Mao’s observation that “change must come through the barrel of a gun”. Fortunately, however, at the very least for those at Axa’s UK life business, Resolution’s latest purchase, this seems to have been included more as a contrast to, rather than, indication of, the way Cowdery believes change must come to financial services. It seems a thoroughly un-Maoist revolution through capital markets must be the order of the day.

Cowdery concluded by suggesting that while it had been a bad few years for the reputation of financial serv-ices, “it is worth remembering what we do and the part we play” and the industry und-oubtedly passes any “social usefulness” test. “Taking small amounts of capital, recycling it and returning it to investors as successfully as we do is nothing we should be ashamed of,” he said.

It was a clever speech, excellently delivered, but some of the audience – OK, me – felt it was a tad self-serving. So the only way the financial services industry can survive is by doing exactly what Cowdery and Resolution are already doing? Well, in that case, the only way investors are going to make money in the next decade is by buying my Investing in Emerging Markets – the Bric Economies and Beyond.

Oh shush now, you knew that was coming. Back at the OBSR honours, the admirably short line-up of awards saw Hugh Young and team win the Outstanding Investor accolade for Aberdeen Asia Pacific, Cedric de Fonclare scoop Outstanding Rising Talent for Jupiter European special situations and Theo Zemek, global head of fixed income at Axa Investment Managers, named Outstanding Contri-butor to the Industry for bringing bonds into the retail mainstream.

M&G won the Outstanding Investment House honour, with OBSR’s research director Richard Romer-Lee noting: “It is difficult for a fund mana-ger to be good at a lot of things – indeed, some might say it is difficult for some fund mana-gers to be good at anything.” Lucky OBSR’s research team do not carry guns.

Julian Marr is editorial director of and www.thought



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