“The dominant bank distributors moved to open architecture and started selling other people’s funds alongside their own,” he recalls.
“There were not that many people who had the scale and infrastructure to look after those people. JPMorgan was one that did, [and] we became dominant quite quickly in the cross-border distribution of mutual funds.”
After five years, however, the chief executive claims he noticed a trend across the industry for larger fund management groups to focus less on portfolio management capabilities and more on asset and revenue growth. “The ability to have a meaningful impact on those types of businesses is incredibly limited. It became apparent to me that what I liked was being able to do something and have an impact, and adapt and do things in a different way,” he says.
In 2006, Mr Mannix had the chance to move to RWC Partners, where Peter Harrison, a former JPMorgan manager and now Schroders boss, was then chief executive. The company had just one team with less than $1bn (£800m) under management, but he recalls there was “a view that we wanted to build something interesting and diversified, and able to offer a clear value proposition that was sustainable”.
More than 10 years later and almost four years into the role of chief executive, RWC has $10bn in assets. Mr Mannix points out: “We’ve built every single team at RWC from nothing to the size they are today.”
He attributes this appeal to a “very straightforward model” and a value proposition that “is more relevant now than it has ever been”.
Since joining RWC he identifies the journey of the equity income team, run by Ian Lance and Nick Purves, as one of the highlights. “They do their traditional income piece, but then alongside that they run these funds that are much more about the outcome we’re delivering for the consumer of the product. Income is clearly very important, but stability of income and growth of income at a steady rate rather than at a rate that keeps up with rapidly rising equity markets is equally very important.”
He adds: “We don’t consider peer groups in the equity income space or indices as relevant benchmarks for us on those funds any more. We look at the output that’s created and the income that’s created and the stability of that through the cycle for the client and that’s how we evaluate success.”
The other highlight for Mr Mannix has been the establishment of an emerging markets division two years ago, when RWC hired a 15-strong team led by John Malloy and James Johnstone from Everest Capital. “We’ve gone from zero in emerging markets in June 2015 to just over $2.5bn today,” he says.
Having already successfully hired in expertise, Mr Mannix is not shy about the possibility of recruiting further teams and expanding the firm’s capabilities.
“Our ongoing ability to recruit world-class capabilities is higher than it has ever been, and at a time when many of the traditional active managers are doing a great job of disenfranchising their investment teams by underpaying them and telling them they’re going to be replaced by computers,” he says.
“That creates the most fabulous opportunity for us to bring in additional investment teams that are doing something different, sustainable and with a clear value proposition.”
He notes the firm is not “trying to cover the waterfront”. Instead, he says RWC is focused on “specific investment expertise in areas where there is a clear value to the adviser of accessing that expertise”. He highlights the increased focus on cost and value, especially in the wake of the FCA’s asset management market study.
“There probably is no bottom to how far prices will fall to provide simple vanilla access,” he says. “[But] if you want to have exposure to a competency and process that has limited capacity, then the value proposition is totally different. It is a function of the amount of capacity and the value it will add, and it is limited by the amount of money that can be allocated to that strategy.”
Mr Mannix points out that in many areas the industry has “been earning excessive amounts of money because they have taken more money than is realistically possible to allocate to those strategies”, adding: “You end up becoming much more benchmark-aware, for two reasons. One, you can’t access in the volume that you need, the things you really want to access. Second, you become very risk-averse and as long as you are within a reasonable range of the index return, then a significant amount of money will not move.”
He adds: “I think that cheap or premium is not the point at all. The thinking is you should be paying rock-bottom prices for investments irrespective of what they do, and that’s not correct. The savings industry has a fantastic habit of allocating significant amounts of money and moving the consumer’s behaviour towards what is hot and easy to sell. Because of the profile that fees are getting from the regulator and media, the easy sell at the moment is cheap.”
He continues: “Do I think its helping that there is fee competition? The answer is yes. But do I think it is right that decisions should be made on price? The answer is no, they need to be seen in the context of other decisions being made.
“Fund managers need to be incentivised to build products that add value over the long term and are paid to continually make sure those products add value, not incentivised to cut their prices and raise so much money in order to get to a sensible level of margin that they can no longer generate interesting performance.”
RWC is far from alone in defining its culture as people-orientated. Mr Mannix says any new additions start with the team rather than a notional space in their product range.
“We tend to find that if you look in specific areas to try and fill a ‘gap’, you would end up gravitating towards second-tier fund managers and we don’t believe that is what the intermediary and discretionary community is looking for. They are looking for things that are distinguished and exceptional,” the chief executive says.
The importance of getting the right insight and people is highlighted by RWC’s work with the consultancy firm run by former US secretary of state Condoleezza Rice.
Mr Mannix explains: “It is about continuing to develop your information and value proposition for your clients. It is hard to simplify emerging markets: there’s always a lot going on, so that means there needs to be an intensity in the activity of the fund management processes and their approach to running the assets. We believe macro elements form a critical part of making good decisions.
“Ms Rice’s business does a number of different things, one of which is an advisory business with a relatively small number of clients. Essentially we will talk to Ms Rice and her team – well connected geopolitical analysts and politicians – about what is happening in places where you don’t necessarily get the full picture from analysts or media, or by doing primary research.
“Saudi Arabia or Russia are great examples of areas where the geopolitical standing is changing. There are significant changes in both of those countries that create opportunities and risks for both emerging markets and the developed world. But if they are navigated correctly, the opportunity to make better investments absolutely exists.”
