When multi-asset trio Percival Stanion, Andrew Cole and Shaniel Ramjee left Baring Asset Management in 2014 to join Pictet Asset Management, the move clearly signalled the latter’s intention to push into the UK retail space with a multi-asset offering. But the team’s explanation of their decision seems to focus more on their former employer.
Having left Pictet in 1998, head of multi-asset Mr Stanion says the attraction of returning to the company was about “taking a longer-term view of the multi-asset business”.
“To remain competitive in offerings in that area we need to be able to manufacture most of the products internally and [we] identified that as a critical consideration. At Barings we faced an increasing existential challenge from the fact that the ability to internally manufacture was being curtailed.
“The components that we needed to create products at Barings were being reduced in number because the firm wasn’t reinvesting in critical equity and bond specialities. We were being driven to rely more and more on third-party products.”
He admits this would have been bearable had he been thinking of exiting the industry entirely in a couple of years’ time, but as his ambition was to build a franchise, “that was a very serious, long-term problem”.
CV - Percival Stanion |
2014 – present Head of multi-asset, Pictet Asset Management 2001 – 2014 Director, head of multi-asset and head of asset allocation at Baring Asset Management 1998 – 2001 Director, head of asset allocation, BNP Paribas Asset Management 1993 – 1998 Director, head of diversified accounts at Pictet Asset Management |
Then came the challenge of finding a fund house with the scale of resources and commitment to asset management that the trio were seeking. Mr Stanion says: “Pictet has this much broader array of internal manufacturing capability, which means we can construct multi-asset products, not just for the UK but for other geographies, using far more internal capabilities of a much higher standard.”
Mr Cole’s assertion “I don’t think I would have survived at Barings for another 10 years”, having spent 28 years at the firm, suggests the team had reached a critical point.
“As my colleagues Andrew and Shaniel will tell you, it’s really nice to be surrounded by high-quality teams,” Mr Stanion says.
“We were very much the only bit at Barings that had success in recent years and that becomes an unbalanced situation. Here, there’s lots of other successful teams who have got different ways of doing things and we relish being intellectually challenged by our colleagues.”
Mr Ramjee adds: “Being able to build a business at Barings was extremely interesting, but the opportunity to get to do it again was thrilling.”
Part of the appeal of Pictet was its owner-managed structure, which Mr Stanion believes is in stark contrast to some of the larger asset management houses where “you had to put a huge amount of energy into internal communications just to speak to all the different teams”.
Pictet already operated multi-asset businesses in Europe and Japan and these have now been brought under his control. “We have a coherent single platform for building multi-asset products globally where we set our tactical asset allocation policy, so we have commonality of thinking about what positions we’re going to put in place,” he adds.
| CV - Andrew Cole |
2014 – present Senior investment manager, multi-asset, Pictet Asset Management 1996 – 2014 Senior investment manager, multi-asset, Baring Asset Management 1994 – 1996 Director of fixed income, Baring Asset Management |
The trio’s track record was not unduly hindered by the move, with the FP Pictet Multi Asset Portfolio its first onshore fund, launching to UK investors in June 2015.
Mr Stanion notes: “Literally within a couple of weeks of leaving our former house and arriving here we had a fund up and running, which meant we had the shortest gap possible between our old flagship fund’s track record and our new flagship fund.”
Mr Ramjee describes multi-asset investors as being “quite nosy”. He says: “You go around and try to find people with good ideas, and I suppose our skill is to try and find a good idea and make it a great idea.”
The trio invests across asset classes in bonds, equities and property to achieve returns of cash plus 4 per cent a year.
But Mr Ramjee explains: “Diversification in terms of owning lots of assets isn’t very helpful. What we want to do is to understand what are the best assets in any particular period and then understand what diversifiers really help those specific assets or indeed help the portfolio against any exogenous threats that may occur.”
The potential universe of assets may be broad, but as Mr Cole points out: “The scope of the assets we own in the portfolio tends to be fairly narrow. As a team, our range on equities over the past 15 years has been close to 11 per cent at the low and near 70 per cent at the high.
“The make-up of that equity exposure has varied enormously, from being predominantly emerging markets and Hong Kong to being Europe plus UK at the expense of all the emerging [markets]. For instance, we’ve not held emerging market equities in the past three or four years.”
Mr Ramjee adds: “In a world that’s very low growth and the dispersion of asset returns are quite narrow, you have to identify the right assets but then have a meaningful amount to make a difference, otherwise you’ll just end up with a mediocre return.”
“That is the way we tend to construct the portfolios: find what’s going to do well and have the ability to have a significant proportion of the portfolio in it, but also understand how to diversify some of the risk so that you’re not thrown around in terms of the volatility.”
When asked what differentiates them from the plethora of multi-asset products now available to retail investors, Mr Stanion points out he and Mr Cole were one of the first in the space back in 2001. But since then they have seen more recent entrants to the market in the form of absolute return-type bond products.
Mr Cole explains they have always sought to deliver equity-like returns to investors while being mindful of volatility.
“We recognise that bonds have been helpful in us achieving that objective over the past 15 years to the extent that we’ve handsomely beaten the cash plus 4 [per cent], but we’ve done it with less than 50 per cent of equity risk when our maximum has been 70 per cent,” Mr Cole acknowledges.
“We’ve had a very good outcome and we recognise that bonds have played an important part in lowering that volume. We say today that if you really want all of the returns associated with equity, you’re probably going to have to stomach more risk going forward than you had to over the past decade.”
| CV - Shaniel Ramjee |
2014 – present Senior investment manager, multi-asset, Pictet Asset Management 2007 – 2014 Investment manager, global multi-asset group, Baring Asset Management |
This, of course, is on the basis that investors won’t be getting the same level of returns from bonds any more.
Mr Stanion proffers a second note of caution: “I think another important consideration for anybody looking to invest money with a multi-asset manager is that because of the success of Gars, every head of distribution globally at every asset manager has been saying, ‘I want a Gars product, I want to be in the multi-asset space’.
“There’s been a plethora of ‘me-too’ products spun out as a result of that, most of them run by people who don’t have a particularly deep experience of running products through difficult times.”
The team identifies 46 direct competitors in the multi-asset space, compared with just a few 10 years ago.
Mr Stanion adds: “There’s been a huge rush into the sector and I think how they do in the long term will be up for question, because the history is that people are very good at putting together a back test of their products or a simulated track record. The trouble is that when they encounter the real world of stressed markets, they often fall by the wayside.”
Ellie Duncan is deputy features editor at Investment Adviser
