InvestmentsMay 11 2015

‘We want relationships that last five to 10 years’

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Originally starting his career on the sales side of the business, Michael Green, chief executive of the international business of American Century Investments, is very much a people person.

He explains: “I spent the first, probably, 15 years of my career in foreign exchange distribution, mostly for Citibank, and that was a lot of fun.” Then in 1998 he moved to the asset management side of the business in the wake of the merger between Travelers Group and Citicorp to form Citigroup. This saw the asset management businesses of Salomon Brothers, Smith Barney and Citibank merge.

Mr Green’s foreign exchange work had focused on asset management companies, with three of his clients turning out to be Salomon Brothers, Smith Barney and Citibank.

“I knew them all from the asset management point of view. The merger of those businesses was a macro event and the asset management businesses were not really thought about in terms of that merger and none of them wanted to be merged. I knew them all and so I was asked if I would go in and make the peace and try to bring these companies together. So my first experience of asset management was a baptism of fire as it was a bit of a dysfunctional group.”

This experience of stabilising a business before building it led Mr Green to Morgan Stanley Investment Management, where after just 18 months he was made chief executive of the non-US business.

“That really changed my appreciation of the asset management business. I learned a lot then about how to run global asset management companies as well as being part of a large group.”

Joining American Century in 2008 was a new challenge for Mr Green and occurred after he came to the conclusion that he wanted to work for an independent asset management company.

“Up to this point I had worked at Citigroup and then Morgan Stanley, so I clearly like American companies. I like the meritocracy and I like the attitude to how they run [their] businesses, that’s part of it,” he explains.

But he points out investment banks are not natural fits for asset management businesses as they are never core businesses for the institutions and they work on different timescales to what investment banks are used to; banks measure performance monthly, while investors try to take a longer term view.

“I came to the conclusion I wanted to work for an independent asset management company. So there were [several] criteria: American, independent, and I wanted the opportunity to do some good. Not to suggest there isn’t good in others, but to do something different than just finance. The ownership structure of American Century is rather unique. We’re owned by a medical research institute – the Stowers Institute – so more than 40 per cent of the profits of the business directly fund cancer research, that’s a unique proposition.”

Mr Green notes he was the first employee of the company outside the US, with the firm headquartered in Kansas City. Initially the international business operated from his home until video-conferencing equipment arrived and his wife suggested he get an office. “You can imagine how that conversation went,” he laughs.

Relishing the challenge he notes that building a business from scratch is a “very different proposition than inheriting an already successful business and trying to improve it”.

“Having the experience, particularly the Morgan Stanley experience of running a global asset management business, meant I had a good idea of how individual markets operated and where the opportunities were. When you’re starting a business it’s important to prioritise and focus on what is practical and what your objectives are.

“In all cases it’s important to understand what the owners want from the business. For the Stowers Institute we are their primary source of income that enables them to do research, so they want a long-term, stable, steady revenue stream so they can plan medical research over the next 50 years. So what that means is it is all about diversification.”

With the original business heavily exposed to the US market, “pretty much everything we’ve done has been to diversify. From my point of view that is diversifying the American risk and building the business outside the US”, he explains.

A unique aspect to his current role is the need to generate money for research over a long period.

“We’re trying to build a business for the long term. We want relationships that last five to 10 years, not five to 10 months. So it is not about rapid asset growth or short-term gain, it is about being sensible and long term. All asset managers have a fiduciary responsibility but our second responsibility is to fund the Stower Institute, so we balance that by being reasonably conservative. We would never dream of taking regulatory risk. To grow a business sometimes you push the edges of whatever environment you’re in, [but] we will never do that. To risk the franchise, that would just be unthinkable.”

That said, Mr Green recognises the need for the business to progress, change and “stay relevant”, but notes the process is more thoughtful rather than setting instant targets.

“The goal of American Century Investments outside the US is to build a diversified business. So it means that how many assets [I am] going to raise this year isn’t my number-one goal. We set up Sicav mutual funds reasonably early on when we started back in 2009-10 and today we have three funds with just over $100m [£65.7m] collectively and they’re growing slowly but steadily.

“There might be asset management companies that would think that’s not a very exciting achievement as you’d hope to raise money much more quickly, but that doesn’t matter to us. What is important is that we are attracting the sort of people we can partner with for long periods; not ‘hot’ money that will come in and out.”

The company’s strategy is to focus on fund selection groups and asset aggregators that can incorporate American Century’s global investment products within a wider solution they are providing. The aim is to gain “a professional reputation for what we do and then one day we might take that out into the retail space directly, but [that’s] really a long way away”.

Mr Green adds: “Our assets outside the US today are very institutionally focused. That’s where we’ve started, but if you look at the business domestically in the US the intermediary business is actually the largest business. I would imagine that’s what we’d do here in the long term. The Sicavs are relatively small today and growing, but we have much more ambition for those over time and hope they would take up a higher percentage of our business in the next five years. But we don’t set particular goals for it.”

“It is really all about building a long-term sustainable proposition, just like for individual investors it is about a diversified business,” he adds. “Diversified clients, diversified geography and a diversified product insulates you from changes in investor profiles. So far we have gathered about $12bn in assets from clients outside the US. It sounds good, but there is still a lot more work to do. Already what we’ve done so far is good enough that we are confident we will be here for the next 50 years. It is about building it sensibly, gradually and consistently over time.”

CV

Michael Green

2008 – present

Chief executive, international business, American Century Investments

2006 – 07

Chief executive officer, non-Americas, Morgan Stanley Investment Management

2004 – 05

Head of distribution, Europe, Asia and Middle East, Morgan Stanley Investment Management

2002 – 04

Head of institutional distribution, Europe, Middle East and Australia, Morgan Stanley Investment Management

1998 – 2002

Managing director, institutional asset management, Citigroup

1994 – 1998

Various roles at foreign exchange sales, including head of foreign exchange sales, UK, Citigroup