InvestmentEurope recently caught up with Kelly Young, senior vice president and managing director of Acadian Asset Management UK (Ltd), one of two investment advisory affiliates of Acadian Asset Management, LLC, the $71bn Boston, US, headquartered manager, which itself is a subsidiary of London, UK, based Old Mutual.
Acadian offers equity, long/short, managed volatility and fixed income strategies to investors, and is looking to push out its quantitative management business across Europe from its local headquarters for the region in London’s City.
IE: Has Acadian’s development as an asset manager been any different from the way others have grown their businesses?
KY: I can’t really comment on others’ history, which you and they probably know better than we do. However, the whole of our business was born out of the conviction that investors are not always rational and that consequently markets are not efficient. This observation itself may not be especially new, but the advent of increasingly sophisticated computer technology in the late 80s and beyond meant that it became possible to build a computer-based process which captured the same drivers of return which traditional fund managers identified (and maybe more), while at the same time eliminating the human emotion which can so distort investor decisions.
It is probably a fair bet that most fund managers started by managing assets in their home market, where they would back themselves to have the deepest and broadest expertise. Acadian was the reverse of this, realising that home bias was preventing investors from accessing the broadest opportunity set as well as creating an undue concentration of risk in one country. Acadian’s first active strategy was non-US all cap, launched in 1988. Thus it was deliberately pitched at US investors looking to reduce home bias.
We are highly collaborative in our approach. No doubt every manager wants to produce strategies for which there is a demand, and no doubt they will do market research to ensure they get it right. We think that perhaps we take this process further in that some of our strategies have been originally designed with specific clients in mind, following detailed discussions with them. A new product is therefore often the result of a genuine partnership with the investor. After the non-US all cap strategy gained traction, we responded to the needs of a US public fund who encouraged us to add US equities and create a genuinely global strategy. Thus our global strategy was born in 1992 and it has been a mainstay of Acadian’s business for much of the period since. Our long short strategies were also originated as a result of discussions with a client who was interested to consider the extent to which our process could identify not just the best stocks but also the worst. We also look for compliments to our existing strategies to be able to offer fuller solutions to our clients (an example of this is extending our coverage within the EM space outside of our core offering, going deeper into the asset class with EM small cap, and outside of it with frontier equities and emerging market debt.
IE: How did you get to the Acadian name and brand, and what is its significance?
KY: Acadian’s founders all have family or educational roots in New England (US), and we have always been drawn to this region’s inspiring history and outstanding natural beauty. Acadia National Park is a particularly magnificent New England landscape, with rugged and diverse terrain and a long history of exploration, enterprise and philanthropy. We deeply embrace these values. The view from Acadia’s mountains takes in some of the broadest vistas on the East Coast, which seems a fitting metaphor for the vision and reach we aspire to in Acadian’s investment process and our service to clients.
IE: You have built an office presence to include Boston, London, Singapore and Japan, but how are you using these to build your European presence?
KY: Over the past three to five years we’ve tried – successfully – to grow the London office to be in a position to be more autonomous. In addition to sales and client service support, which has been the backbone of Acadian’s European operations since we opened the office, we also have dedicated investment management expertise, as well as important legal and product management support. We expect to see continued expansion in 2015.
IE: Can you outline the business focus and the impact this has in terms of, for example, products you are seeking to offer?
KY: Our focus falls down two lines; clients and products. In terms of client focus will may look to expand into Southern Europe over the next 12 to 18 months, and will certainly be increasing our focus on Switzerland and Germany. The UK and Nordic regions will continue to be of great importance to us in the coming year and we expect on-going focus to these regions.
In terms of products, 2014 was a year of expansion for the Ucits platform, and an important one in allowing us to offer more niche strategies to clients in addition to the more ‘core’ type of strategy.
We have done a good job in gathering assets in these funds, but those efforts will continue into 2015 to ensure critical mass. We think risk will be at the forefront of investors’ minds in the coming year and in terms of product demand, managed volatility is an area we think has real opportunity for further growth. Within this strategy, we manage approximately $10bn in assets globally, and as we move into more uncertain markets, the downside protection that this type of strategy offers will undoubtedly capture the imagination more and more now that this type of approach has gained broad acceptance.
Similarly we think the market neutral strategy will be an area of focus in 2015. With more negative views on markets in general there is more demand for non-directional long/short strategies. For investors who are able to invest in long/short we think our global diversified approach to market neutral makes real sense. Having this strategy available in a Ucits format will, we hope, bring a benefit to a number of investors looking for a sophisticated market neutral strategy but with the benefit of additional liquidity versus offshore structures.