The change of work habits brought about by Covid-19 has taken the war for talent up a notch, forcing managers to accommodate the best people wherever they want to live, says Jenny Johnson, president and CEO of global investment firm Franklin Templeton.
Having this year acquired asset management firm Legg Mason in a $4.5 billion deal, Johnson said workplaces would increasingly see their employees either working full time at home or more likely some kind of “hybrid model” where people are expected to come to the office but far less often.
“There’s going to be that time where you need to do the face-to-face, but we’re also going to let people work more remotely,” Johnson told the Investment Magazine Fiduciary Investors Symposium on Tuesday.
“What it’s also done is it unlocked the talent competition. In other words, somebody can be in another country and recruiting your employee.”
Legg Mason is known for its “multi-boutique” business model. When Conexus Financial chief executive Colin Tate asked if Johnson wanted to have her cake and eat it too by striving to be one of the world’s largest asset managers but give employees the flexibility to work like they’re in a boutique, Johnson replied: “Absolutely”. Keeping the independence of a boutique manager backed with the strength of a large platform was “the way of the future”, she said.
“What you get with Legg Mason and Franklin Templeton is a series of independent boutique managers with the strength of a $1.4 trillion platform investing in things like data analytics and technology, investing in risk management capabilities, investing in client service, and it’s hard to do all those things as just a small boutique manager.”
She acknowledged there were periods of time when people in the organisation asked whether Franklin Templeton had paid too much for Legg Mason, having paid $4.5 billion in cash and taken on $2 billion of Legg Mason’s debt just as the pandemic was taking hold. But she said firms are “never going to be perfect” in the timing of these deals.
“We knew it was the right strategic fit and we never looked back,” Johnson said. “In the end we did this deal for a growth story. It was about broadening our product lineup. It was about diversifying our client base, we’re now 50 per cent institutional and 50 per cent retail.”
Franklin Templeton still has about US$5 billion in cash, and is on the lookout for opportunities that come about from technology advances, she said.
Technology will play an ever greater role in the investment decisions of traditional active managers, Johnson said, as they will need to leverage massive amounts of data and gain insights from non-traditional data sources to drive investment decisions.
“You’re going to find your alpha because you have different insights than your competitors have, and that’s going to be around data analytics,” Johnson said.
On the retail side there will ultimately be “true customisation on the delivery of products”, she said, pointing to the fractional shares offered already on some platforms supported by blockchain technology.
“So you’ll be able to do a truly customised portfolio that traditionally was really just available for the ultra high-net-worth. It’ll be tax-efficient. It’ll have the thematic tilt that you want. It’ll be very much targeted towards your investment goals.”
With a strong focus on diversity, Johnson said diversity inclusion is a “growth story”. Now is a pivotal point in history where asset managers have the ability to deploy capital to diverse individuals who have been left out historically. For example, the firm is in the process of building an all women entrepreneur venture capital fund.
“Only two per cent of venture capital has gone to women,” Johnson said. “How is that possible? Fifty per cent [is what] they cover of the population and it’s two per cent of the VC money, right? So what you hear women say is…the reason they think that they didn’t get funded was they said the venture capitalist didn’t understand my problem. Well, so you look at it, and I think it’s only 12 per cent of VCs are women.”