Fixed IncomeJan 12 2015

“Fixed income can play a role in creating income for people”

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Chris Iggo’s career has taken him across the Atlantic to New York and back, and from a trading floor to behind the desk at an asset manager.

Now he is chief investment officer of fixed income at Axa Investment Managers (Axa IM), after joining the organisation back in 2005.

What inspired Mr Iggo’s subsequent career was his first job straight out of university at the Economist Intelligence Unit, where he focused on emerging market countries at a time when the Latin American debt crisis was unfolding.

“So I was really interested in how developing economies were interacting with the global economy and the problems that they had, and how they kept going from one crisis to another,” he recalls.

“I did my masters degree part time while I was still working at the Economist Intelligence Unit and focused heavily on developing countries, their growth models and the sustainability of debt.”

It was while he was there that a role to join the economics team at Chase Manhattan Bank (as it was then) came up, looking at country credit risk.

He continues: “But then being in a bank environment towards the end of the 1980s, early 1990s, things started to change and I got dragged into the Treasury function and foreign exchange and I went off on that path for a while. So I was a foreign exchange economist.

“Then I was transferred to New York in 1992 where I worked for Chase on the trading floor as the trading desk economist, primarily for the foreign exchange business but also for the bond business.”

Mr Iggo stayed in New York for six years in total, moving to Barclays Capital when it was under Bob Diamond’s reign. He was hired as the bank’s chief economist in the US, but for personal reasons he did not want to stay on in New York and moved back to the UK, remaining at Barclays Capital.

Having a career that has straddled New York and London, Mr Iggo is well positioned to consider how the two cities compare as global financial centres. He says: “I think over 20 years they have kind of converged. I would say that the US is still a bit more parochial, whereas London is much more international.

“Although the bond market is massive, the equity culture certainly dominates the media coverage of financial markets in the US. There is a real culture of trying to grow your savings through equities, whereas bonds are seen [as being] for big institutions.”

In 2000, Mr Iggo was approached to join Cazenove Fund Management, where he became responsible for running the firm’s investment strategy.

The role involved “moving from the sell side to the buy side and that’s when I really became much more involved in the investment decision-making process,” he explains. “So I was running investment strategy for Cazenove, which was a lot about asset allocation between equities and bonds, designing private client portfolios, and doing the macro analysis as well.”

He insists that his transition from sell side to buy side was a natural one. “I wanted to be much more involved with the real decision-making of investment portfolios but culturally it was quite a big change because coming from a huge trading floor in Barclays at Canary Wharf to a rather sedate gentlemen’s club-type atmosphere of Cazenove was a big culture shock,” he points out.

He notes that taking up the job at Axa IM placed him back in more familiar territory though, as it’s a global organisation and “much more innovative than many other asset managers”.

He adds: “There are a lot of ex-investment bankers working here, so the mindset was a bit more what I was familiar with from the sell-side days.”

Of course, Mr Iggo had a vision for the fixed income part of the business when he accepted the chief investment officer position in 2008.

He explains: “I wanted to create a fixed income team that was globally focused, had a clear investment philosophy and process, and that was able to respond quickly to changing market demands for fixed income products.

“My starting point was a disparate team, with no real connection between our London and Paris offices – very much a silo mentality. So my first year was spent internally reorganising the teams, trying to generate a more global outlook by increasing the cooperation between the different offices and building a global process, which meant that everybody had to cooperate and integrate their investment views.”

In spite of having established a top-down investment process at the organisation and embedding a team culture, Mr Iggo recognises that there is more work to be done, particularly in extending the company’s global reach.

“There are parts of the world we are still underrepresented in, both in terms of sales but also in terms of fund management,” he observes. “So recently I’ve been building up an Asian fixed income team based in Hong Kong. The aim there is to develop a strong third-party business with Asian institutions and also more wholesale markets. Savings rates are very high in Asia but up until now the capital markets haven’t been developed enough to allow those savings to be effectively used.

“So there’s this huge pool of savings that need to be invested in something other than bank deposits. Fixed income can play a massive role in creating income for people who are saving for retirement or for [their] children’s education. There are massive opportunities there.”

Turning to the US market, Mr Iggo says the business is predominantly focused on high yield in fixed income and that he intends to extend this to other parts of the fixed income market.

Mr Iggo suggests: “We are, and we will continue to be, in a relatively low-yield, low-interest rate environment and since the financial crisis one of the other aspects that we need to consider is the liquidity in the market and the changing market structure. And particularly the reduced ability of banks to provide liquidity because of the regulatory and capital constraints they face.”

For Mr Iggo, his response from a fixed income perspective has been to focus on short-duration strategies.

“These are essentially fixed income strategies that focus on the short end of the yield curve, so investing in bonds in the one-to-three-year part of the curve mostly,” he reveals. “This started off with our US high-yield business because it was a very successful strategy for them.

“Our view was [that] we know companies well, we do a lot of credit research, we know that if we invest in a company for three years we’re pretty sure we’re going to get all the coupon payments and our money back. So we don’t need to trade those bonds actively. We just buy and hold them and they mature in three years’ time and then we reinvest in something else.”

He notes: “It’s a conservative strategy but it’s one that’s quite appealing for investors who don’t want to hold money in cash because there’s no return, or don’t want to take on too much interest-rate risk by holding longer maturity strategies.”

Mr Iggo clearly enjoys his current role, which plays to his strengths as an economist.

“I’m doing the perfect job, in that our investment process is driven by analysis and understanding of global economic trends, of central banks, of government policy,” he adds. “And the challenge is to understand how that gets played out in financial markets and to deliver good returns to our clients.”

CV

Chris Iggo

2008 – present

Chief investment officer, fixed income for Europe and Asia, Axa IM

2005 – 2008

Senior investment strategist, Axa IM

2000 – 2005

Head of strategy, Cazenove Fund Management

1996 – 2000

Chief US economist, then chief European economist, Barclays Capital

1989 – 1996

Economist and foreign exchange strategist, Chase Manhattan Bank