Nick Phillips, head of international third-party distribution at Goldman Sachs Asset Management (GSAM), flashed a smile when the topic of the fund house’s development in the UK retail space was raised.
He has some cause for cheer, as the GSAM more than doubled its Sicav level over six years from $19.6bn (£15.28bn) in January 2010 to $46.2bn in May 2016.
Mr Phillips attributes much of this growth to the evolution of the firm’s partnership model with its panel of distributors within Europe, the Middle East and Africa.
From 2000 to 2010 the company’s business model was skewed to sub-advisory and outsourcing third-party funds, as well as distributing its own investment products through retail and private bank firms at head office level.
In 2010, the company sought to develop its proposition within the burgeoning retail marketplace in continental Europe by increasing its numbers from 29 to 80 people to service the needs of distributors.
It later started expanding into the UK in late 2012.
Mr Phillips said: “We did not make that investment in the UK because we wanted to wait and see how the Retail Distribution Review would play out, and also because the operational familiarity of UK platforms with Sicav was not there. That developed over the next few years so that an international Sicav was in the exact same place as an open-ended investment company from an end user perspective.”
Mr Phillips was coy about revealing the names of the company’s ‘partners’, but simply said: “There are a number of global private banks, dominant regional banks and adviser networks that we work with on this basis.” He added that in the UK, GSAM works with four “meaningful” distributors, excluding big private banks.
GSAM claims it is selective when choosing a partner. Mr Phillips whittled down the criteria for the collaborative agreement to two key elements: reach from a distribution perspective and scalability.
He said: “In order to build that relationship you have to spend a lot of emotion and time, but there are a finite number of hours in the day. Adding another distributor is not an easy discussion as there is a lot of thought and planning that goes into it.”
Those that are selected onto GSAM’s distribution panel are given access to its tri-faceted support services, called Strategic Advisory Solutions, at no cost.
A third of the service is designed to provide insight to distributors on the macroeconomic pressures and trends affecting their portfolios.
The next part, labelled business practices, gives the firm’s partners access to its team of specialists who provide training in a number of areas, such as prospecting, all designed to help the distributor strengthen its business.
The third element of the service is portfolio construction, which involves a collaborative effort from provider and distributor to build more suitable portfolios for the end client.
As part of wider efforts to increase its exposure in the UK, GSAM launched a handful of funds – the most recent being its first multi-manager Ucits fund, which invests in alternative liquid strategies. This was unveiled in December last year. According to Mr Phillips, the firm identified a growing appetite for liquid alternative investments with its musings with distributors.
He said: “I think it is a lesson learned from 2008 where the performance of uncorrelated asset classes helped from a drawdown perspective. Having a product like this [GSAM’s multi-manager Ucits] in conjunction with equity exposure has been hugely beneficial for clients. Diversification is growing in popularity, and rightly so. Clients would have suffered more if they had 100 per cent exposure to equities following Brexit.”
Financial Adviser’s parent publication,the Financial Times, reported that Goldman Sachs ordered staff working within its asset management arm to trim spending amid significant redemptions from some of its renowned funds including its US mutual fund.
The report quoted Morningstar data which showed investors have pulled money for 15 consecutive months from GSAM’s US mutual funds.
Mr Phillips said: “Our business is a cyclical business and people will allocate to and from different asset classes. We have people allocating to emerging market equity and debt now. US equities valuations are at an all-time high and people want to reduce their weightings – it’s their choice. That is just normal business for us.”
On GSAM’s relationship with the two other divisions within the Goldman Sachs group, he added: “There are Chinese walls – there is a level of information you can share and there is a level of information you can’t go beyond.
“Being part of Goldman Sachs bank gives us the ability to leverage the risk systems of the bank’s securities division and adapt them internally for asset management so we can then build a sophisticated proprietary risk system for all our equity and fixed income products.”
Myron Jobson is a features writer of Financial Adviser
Nick Phillips’ career highlights
2013-present – Head of international third-party distribution, GSAM
2009-2013 – Head of EMEA third-party distribution, GSAM
2002-2009 – UK and Nordic third-party distribution, GSAM
2000-2002 – UK third-party distribution, GSAM
1996-2000 – Regional manager, Credit Suisse Asset Management
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