“It is a big deal to be entrusted with management of someone else’s money,” says Threadneedle Investments chief investment officer Mark Burgess. “They entrust their money with us because they believe we will do a good job for them in terms of performance.”
Financial services firms in general and asset managers in particular have faced a lot of regulatory scrutiny over the last few year with both UK and European regulators looking to increase their powers. This week saw the Financial Conduct Authority issue JP Morgan Chase with a £137m fine over the action and oversight of the “London Whale” in the investment bank’s chief investment office while several asset managers have been hit with multi-million pound fines over issues such as client money handling.
Burgess says the industry has to be aware of how it has ended up in this situation.
“I think the regulator is endeavouring to make sure more financial services companies are as robust as clients believe they are.
“We need to make sure we continue to behave at the very highest levels and highest standards to maintain the trust of our clients. Is the regulator overdoing it? Maybe, but I understand why we are in this situation.”
It is undeniably a huge responsibility, steering the investment policy of an asset management from with over 150 investment professionals and £83.5bn in assets under management.
The East London-born and Keele University-educated CIO is a rare mix of confident about where the company sits in the market but Burgess is all too aware of the pitfalls and uncertainty nagging the industry.
The loss of assets at Schroders following Richard Buxton’s departure and the amount of money concentrated in the Invesco funds run by Neil Woodford are high profile examples of people risk in asset management.
“I think people like working here,” says Burgess. “But I am worried about losing talent. I worry about a lot of things but the thing that keeps me up at night is losing key talent.”
In comparison to other firms, Threadneedle has not had as many staff poached as its competitors have. However, Burgess adds: “It is an industry where people do move around. Our experience over the past couple of years – touch wood – has been pretty good and we have not lost many people. Fund managers like to outperform so we make sure we offer them a platform which allows them to do that. However, you are constantly at risk from your key people being attracted to work with other players. So it does keep me awake at night.”
Burgess joined the firm in 2010 from Legal & General Investment Management where he was managing director and head of equities and formally replaced Sarah Arkle in the first quarter of 2011 and he says he hasn’t embarked on dramatic change for the sake of it.
Burgess says: “I joined for loads of reasons, particularly as I had a tremendous respect for the firm’s performance track record. We evolved through small changes, there was no need for a fundamental overhaul.”
His first few years in the job have seen the firm have to cope with extreme variations in investment markets but Burgess says the investment approach used by the firm has seen them negotiate the changing conditions.
In total, Burgess oversees a team of 150 investment managers and analysts and the central investment approach is to blend a micro-economic view with the macro view.
“The word ‘teamwork’ is bandied around a lot”, says Burgess. “But we use it as a framework. The way we think the world looks together informs us how we should put together the portfolio – and we have generally been in the right place at the right time.”
Burgess says the fact the firm instils an awareness of the macro economic situation in all its decision making has helped served it well over the last five years.
“Clearly, in the aftermath of the financial crisis the macro has dominated and we have lurched from one macro catastrophe to the next. We give ourself a massive advantage by marrying the micro and the macro because the latter is so dominant. If you were just down on the ground looking at individual companies and so forth you would be quite disadvantaged.”
Looking at the bigger economic picture, Burgess says he is not getting carried away by the UK’s return to growth.
“It depends on what is driving growth. If we are seeing genuine growth then that is a good thing. For instance, I am not saying the housing market is not important in the UK. But it does feel old school – the UK market is not sustainable. There has been a lot of focus which has not, in the long term, been invested in the economy. It does not benefit society. I might be happy that the value of my house may have risen since I bought it, but it does not help my children when they come to the property market.”
Regarding Bank of England governor Mark Carney, Burgess is cautiously optimistic on his impact but welcomes his attempts to instil some market confidence by using forward guidance.
Burgess says: “It is still very early days. And we need to remember this economy is very different to the economy of Canada – it is a very resource rich country and did not suffer as badly in the crisis.
“It is important Carney stamps his own identity on matters. His foray into forward guidance made me feel more comfortable. He had to issue a caveat because the world is unforcastable – but he does need to give us some timelines.”
Elsewhere, Burgess has encouraged by Japanese prime minister Shinzo Abe’s programme of economic reform and has been overweight Japan since this aggressive (and some would argue, ambitious) monetary policy was first introduced.
Burgess says: “We constantly analysing it because they are doing everything they can.
“However, we should not forget they are going to lose a third of their population in a few years so they really need an immigration policy.”
With active regulators and central bankers – as well as volatile and uncertain markets – Burgess certainly has a lot to keep an eye on while overseeing Threadneedle’s investment process. For a man who says his career ambitions have already been “far exceeded”, the task at hand is making sure that the firm is able to ride market conditions and events effectively.
Born: East London
Education: Langdon comp, BA (hons) economics and philosophy, Keele University
Career: 2010–present: chief investment officer, Threadneedle Investments; 2003-10: head of equities, Legal & General Investment Management; 1990-02: fund manager, managing director, Morgan Grenfell Asset Management/Deutsche Asset Management; 1989-90: fund manager, Posthorn Global Asset Management; 1986-89: fund manager, Refuge Assurance
Likes: Food and drink, exercise, my family, all things automotive
Dislikes: Being kept waiting
Drives: Audi RS5/Ducati 916
Book: Birdsong by Sebastian Faulkes
Film: LA Confidential
Album: Stone Roses by Stone Roses
Career ambition: Have been far exceeded
Life ambition: To see my children grown up and happy
If I wasn’t doing this I would be…. a chef