InvestmentsJan 11 2016

Don’t perpetuate boom-and-bust in UK

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Chris Jackson had spent 20 years working at asset manager M&G before leaving to join Natixis Global Asset Management in 2013 to head up its UK retail operation.

He is now deputy chief executive of international distribution at the business, which operates as a multi-affiliate model, and has just overseen the company’s move to a new office overlooked by St Paul’s Cathedral.

The relocation to the larger premises comes as Natixis continues to establish its presence in the UK retail investment market.

“On the one hand there are elements of the business that are very mature. As a business we’re more than $900bn [£603bn] in size, but on the other hand there are pockets of distribution that are still right at the nascent stages of development – and the UK retail space is exactly one of those,” Mr Jackson says.

“We were in a pretty cramped environment when we left [the previous office in October]. There were 85-90 people in that office, which three or four years ago would have been 20, so we’re on a growth curve in terms of people. The reason for this is quite straightforward; what we’re building in the UK is not just a business for the UK.

“It started off as a sales office for the institutional guys less than a decade ago, and then we built the retail sales guys from late 2012 to early 2013. We’ve got lots of senior people and big chunks of each of the service teams that support the international business now based in London.”

The other two sites are Boston, in the US, and Paris, but Mr Jackson insists the UK capital is rapidly becoming its “hub for growth”.

The company is structured so that it has two distribution businesses: one serves the US and Canada, and then the international distribution business serves the rest of the world excluding North America.

“There are a number of independent manufacturing units – fund management houses – that are all subsidiaries of the same Natixis umbrella group,” Mr Jackson says.

The most well-known of these subsidiaries include Harris Associates, Loomis Sayles and H2O Asset Management – home to the H2O MultiReturns portfolio that is increasingly gaining traction with fund buyers.

Mr Jackson adds: “What we’re absolutely insistent on is that those investment management businesses operate autonomously to minimise or eradicate any of the contagion between management ideas.”

He stresses that when the team adds businesses to the multi-affiliate model, the aim is to “fill gaps”, not to “double up”. He sees the model as a huge opportunity for the industry.

“You can deal with one sales person, one conduit into our business, and access nearly 30 different investment managers. I really like the model and I think it’s going to increase in importance. I think there will be a greater buy-in to a few operating models and a few multi-affiliate models like our own, and then you will have a really efficient intermediary business.”

But what he really believes sets the business apart is its portfolio research and consulting group (PRCG).

“The traditional method of gaining footprint and recognition in a new market is to spend a load of money on brand, make a big splash, get people to recognise your name and your logo, and push all the cash down that branding pipe,” he says.

“There is a lot to be said for that, but it’s not how we’re doing it. We’ve chosen to create this portfolio research team, in the US initially and now in the international marketplace. Rather than spend a load of money on quick-decaying brand advertising, we’re embedding that cash in a long-term, highly skilled team and they are the means by which we advocate our principles.”

So what are those principles? Mr Jackson explains: “Our sales teams work with the PRCG – they go out to their clients and we start to talk about portfolio construction. That’s the key principle of our business.

“We don’t want to do a product push, and we don’t want to perpetuate some of the boom-and-bust product situations you might see in the UK and any other markets.

“We’re advocating some key tenets to portfolio construction, and then working with our sales guys and individual clients to help them analyse their own portfolio construction.”

As an example, he observes it is more difficult to create a fully diversified income portfolio, “because a lot of the underlying funds are reliant on the same beta, so there’s quite a high correlation often between some of the funds and products”.

This is where the PRCG would come in, he adds: “We might say, did you know you are doing manager diversification of these three funds you have for UK equity income? The underlying correlation of those funds is so tight that you may want to consider trying to find a significantly diversifying product and have less of the correlated funds together.”

Mr Jackson says it’s about casting a “fresh pair of eyes” over portfolios. “We’ve engaged, we’re trying to understand what’s important to those particular intermediaries, and then we have an ongoing relationship that we’ve started.

“So rather than a quick in-and-out product sale that may perpetuate this whole boom-and-bust cycle we really don’t want to be involved in, we talk about the portfolio, find the places we can help and offer a product that has the right characteristics to increase the efficiency of the way those intermediaries are working.”

This model could prove ever more useful following changes to pensions in the UK.

He says: “Regulation has evolved and become much more flexible and gives clients a better opportunity to manage their own destiny with their assets. That’s terrific, but it does put a big onus on individual clients. They’ve now got to better understand what the options are that are available to them.

“It’s becoming ever more important that portfolio construction should be the absolute key to financial planning for people who have a pool of assets.”

Turning to his own career trajectory, Mr Jackson admits his intention was never to spend quite as long as he did at M&G. “I like the excitement, the growth, the building, the change – it’s what keeps me going, frankly. If two days are the same it’s not great for me,” he concedes.

“Trying to take a business from here to here, then that’s really exciting. [M&G] had got to a point where it had grown, it knew where it was in terms of the size and scale of the business, and at the same time I was thinking there are other people that could do this better than me when the opportunity for Natixis came up. It could not have been a better proposition.”

Natixis hired Julian Chinnick as sales director from M&G in January 2015. Mr Jackson, who had worked with him at their previous employer, suggests it was a significant move.

“It was a really nice validation that what I think I had seen at Natixis and its ambition and the way it was building as a business, wasn’t just me looking through rose-tinted glasses, the same points have appealed to other people that I highly respect in the industry,” Mr Jackson points out.

He doesn’t rule out further hires in the future and says the company is committed to building on its Oeic range in the UK.

“We want to gather assets clearly. That’s our business, that’s how we stay in business, but we’re not going to be an also-ran product,” he says.

“We’ll always use our manufacturing to find that edge we can take that offers people something different, and that resonates with all of those good principles that we advocate within portfolio construction.”

CV

Chris Jackson

2013 – present

Head of UK retail, then deputy chief executive of Natixis Global Asset Management

1993 – 2013

Latterly director, M&G Securities, M&G Financial Services, Prudential Unit Trusts

1989 – 1993

Graduate trainee, 
Friends Provident