Excuse the laboured metaphor in the headline, but as the incubation of boutique funds managers continues to be the major trend shaping the manufacturing industry, it’s becoming clear that the eggs (that is, the big institutions) are losing out to their freedom-loving foes on the specialist side of the coop.
That many executives in our leading banks and insurance companies just don’t ‘get’ the mindset it takes to be a funds manager has never been clearer.
I hate to pick on Suncorp, but right now it’s the prime example. Not only is it the organisation known for selling its stake in Hedge Funds of Australia too cheaply, but it’s nine-person Australian equities team defected to an incubator in January, and here it is August with the remaining $4 billion still in an interim indexed arrangement with Russell. Look, if I owned the value created by a well-respected team managing $5 billion plus, it would hurt me to give any of it away too, but I’d rather have something than the nothing that the Suncorp side of the Suncorp/Tyndall investment group has currently got.
Suncorp’s wariness of a big investment in manufacturing has resurfaced again since January. If the talkative boutique incubation industry has it right, the majority of Portfolio Partners’ Australian equity team had accepted provisional offers and was ready to sign on with Suncorp, before the deal was squashed by incoming wealth management boss Geoff Summerhayes, and/or the Suncorp board, as ‘too expensive’. (PP’s Craig Bingham nor Summerhayes will comment.)
Apparently the strategy vis a vis inhouse funds management is currently being reviewed, which is hardly the most confident message to the guys at Tyndall Investments, who are doing very nicely thankyou under the ‘corporatised boutique’ structure that’s been in place since the days of Promina ownership.
To be fair to Suncorp, it’s not the first institution to struggle with that rare breed of person known as the portfolio manager.
Look at the boutique creation efforts of Westpac and NAB – they’re willing to go a long way toward accommodating the hopes and wishes of our top investment brains, but not quite far enough to give up a controlling interest. That’s academic when markets are firing, but bear markets could be the backdrop for a battle of wills that proves fatal.
As one of the independent incubators said to me last week: “Founding and running a boutique is the loneliest job in the world. What these guys need more than anything is a like-minded backer to talk to when the hard times hit.”