When Old Mutual Equities and MacroSolutions announced their merger earlier this year, the number of boutiques within the Old Mutual Investment Group (OMIG) fell to three. This is apart from the four other businesses within Old Mutual Investments – Futuregrowth Asset Management, Marriott Investment Managers, Old Mutual Alternative Investments and Old Mutual Specialised Finance.
Fourteen years ago, when Old Mutual Investment Group unveiled its new boutique model, there were 12 businesses in the group. Even more were added in subsequent years.
More recently, however, consolidation and rationalisation within the group have made it appear that the boutique model has for all genuine intents and purposes been abandoned. It is even debatable whether the term ‘boutique’, as it is used within OMIG, is truly reflective of the scale of these operations.
For new MD, Tebogo Naledi, where the group finds itself now is not, however, a repudiation of the intention behind the boutique model.
“It’s been a long journey of learning and refining,” Naledi said. “I view it as an evolution. An evolution which I think perhaps wasn’t designed as such, but its intent was to get to where we are now.
“I think that what we have now in terms of our structure and focus is what was actually intended by the boutique model. Each of the three boutiques has it own strong capabilities, and they are each very clear about which market need they are serving.”
The three businesses left within OMIG are MacroSolutions, which is a fundamental, active management house; Customised Solutions, which offers systematic and index capabilities; and Liability Driven Investments.
“The term ’boutique’ is one which different people interpret differently,” Naledi said. “We are using the term within OMIG, but really to refer to centres of investment excellence.
“From a process, philosophy and talent point of view, each boutique has its focus and independence. There is no contamination from any other team’s philosophy. That is something we are committed to.”
Ultimately, any investment business is judged on its performance. Part of the argument for OMIG’s adoption of the boutique model was to create an environment for stronger alpha generation.
The results produced by OMIG’s boutiques have, however, not always been stellar. There are some outstanding long-term performers within the Customised Solutions boutique, such as the Old Mutual Double Alpha fund and Old Mutual Premium Equity fund, available to institutional investors. But the group’s more prominent retail funds have largely fared less well.
“We are an investment management business, which means that investment performance is the product that we sell,” Naledi said. “Of course, there is service, pricing, and how efficiently we deliver that product, but ultimately the thing we are here to produce is investment performance. And across the different capabilities, that has been quite mixed.
“My job is not to be making investment decisions,” he added. “The boutiques will do that.
“My job is to make sure that from a resourcing point of view, a structure and culture point of view, and from the point of view of providing clarity to in terms of client expectations, the teams have what they need to succeed. And, given what we have in place now, I have confidence that we will deliver.”
Naledi added that given the clear focus of each boutique, and the investment capabilities each offers, OMIG is also now very well positioned to respond to client needs.
“Even though we have structured our teams as independent boutiques, that independence is around investment decisions,” Naledi said. “The business model at an OMIG level is more about having diversified investment capabilities.
“Clients have become more sophisticated in how they structure portfolios, and how they utilise fee and risk budgets. The philosophy of using purely active or purely passive is still there to some extent, but it’s changing. Clients recognise that there is a role for both to play.”
This ability to offer solutions that incorporate strategies across the spectrum is where he believes the strength of the group lies.
“Our business model is about having these diversified capabilities, where the client conversations we can have are rich conversations about really building solutions. We can approach this with a problem-solving mindset rather than as a product-push, because we have these diverse capabilities that can help solve a problem.”
Patrick Cairns is South Africa Editor at Citywire, which provides insight and information for professional investors globally.
This article was first published on Citywire South Africa here, and republished with permission.