Asset management think tank seeks members in Europe
A group of owner-mangers from different parts of the asset management industry are seeking new associates in Europe as they promote an ideal of social utility and responsibility.
The London-based New City Initiative (NCI), established in 2010, already has 10 affiliate members in France, including Carmignac Gestion and Comgest, but is hoping to attract new support from fund and wealth managers, especially in Germany, Spain and Switzerland.
The group has been active long before recent banking scandals broke, but the revelation last week of the fixing of the LIBOR interbank rate by some Barclays traders, will add new impetus to calls for “root and branch” reform of the governance of the biggest integrated banks.
NCI chairman Daniel Pinto, who is also chairman of Stanhope Capital, says the group comprises 35 asset managers, all private firms owned and managed by the founders, dedicated to genuine alignment of manager and client interest, alongside a perfectly legitimate entrepreneurial spirit.
“People take excessive risks short term if the only incentives are commissions or performance fees. But excessive risk is not taken by owner-managers, who typically have a longer term outlook,” he notes.
He calls NCI a ‘think-tank’, led by practitioners rather than academics. Trade associations, he adds, have a valuable role to play but often have to accommodate a wide range of competing member interests, while having to defend the whole membership body.
“We have deliberately not called NCI a trade association. There is nothing wrong with that, but we start from a different place, which is adherence to an ideal. We are not defending the industry, we are promoting an ideal.”
NCI has two main objectives: to engage with influencers and regulatory initiatives to ensure that legislation actually does make the financial system safer, rather than resulting in unintended consequences, and to counter the view framed by a British politician that “the City”, or the investment sector, has no useful social purpose.
Contrary to popular opinion, Pinto said there is “considerable commonality” of views between colleagues in London and other capitals. “There is much more in common than that which divides us. We are hoping to establish clusters of firms who think like us in each country.”
He said the 2008 financial crisis, and the fallout that followed, appeared to be a debt crisis. “But in fact, it is a crisis of governance, of ownership, among financial firms. We want an industry that is entrepreneurial and aligned with client interests, and not simply driven by bonuses. We have to make the industry less risky, but we also need to make ourselves understood. There are common caricatures of bankers, but very little understanding of what we do.”
He said those institutions taking substantial risks have to abide by rules suitable to them. “But the argument that that means shrinking the industry doesn’t make sense. Another sector will not grow by making this one smaller. But we do need to improve the way the industry works.”
NCI’s two functions are interacting with regulators and policymakers on effective control and monitoring of the asset management business, and a mentoring programme which gives promising students without financial sector connections a chance to work and build a career in the business.
The NCI has made submissions to relevant bodies on the subject of executive remuneration and on the proposed Financial Transactions Tax.
Pinto is critical of the disconnected culture of large institutions, where managers are distanced from their clients and from the impact of their decisions. “For example, with CEOs, the stock price may be more important than what is happening within one division of the firm,” he notes.
Boards should re-think how they are incentivising key people, he adds. “This is not about regulation, it is about governance. They have to keep the spirit of ownership in key parts of the business structure. People talk about banks being too big to fail, but in fact they have become too big to manage.”
He believes that executive pay should reflect what a firm achieves for the client. “For example, you could pay a bonus, but lock it into an escrow account which is invested in the products the manager is selling. That will focus the manager because his own money is tied in.”
He also points out an unacceptable blurring between advisors and salespeople. “There has to be more transparency in how advice is communicated to clients. When are you an advisor and when are you a salesman? There is nothing wrong in sales, but it must be labelled as sales, not advice.”
Members of NCI
Bedrock Asset Management (UK) Ltd
C Hoare & Co
Dalton Strategic Partnership LLP
Egerton Capital Ltd
FF&P Asset Management Ltd
Financiere de l’Echequier
Focus Financial Partners LLC
IT Asset Management
La Financiere Responsible
Mayfair Capital Investment Management Ltd
Odey Asset Management
Oldfield Partners LLP
Orion Capital Partners
Sand Aire Limited
Sloane Robinson LLP
Societe Parisienne de Gestion
Somerset Capital Management LLP
Stanhope Capital LLP
Sycomore Asset Management
Troy Asset Management Ltd
Veritas Asset Management
Vestra Wealth LLP