Today I feel a bit like a deep-sea diver who always knew that the lost continent of Atlantis lies just off the coast of Bermuda and has now just spotted a cooking-pot or funerary urn lying on the sea-bed just where he’d always expected it. Or an ornithologist who had never accepted the extinction of the dodo and now hears an entirely unfamiliar squawk from a dense patch of Mauritian rainforest.
Being in financial services marketing, my elation may be similar but the cause is superficially less exciting: a story in New Model Adviser that AVIVA Investors is to “pull back” from the UK retail investment market.
On closer examination, the verb “pull back” is being used here in an unusually specific way. As far as I can tell, it means “give up on trying to sell equity funds but carry on selling the kinds of actively-managed funds in which the asset management arms of life companies have more credibility, namely fixed income, property and apparently multi-asset.”
Still, this is definitely an RDR-related development which I have been expecting for an almost-embarrassingly long while, and here, at last, it is.
The backstory, though potentially boring, is mercifully brief. RDR exerts a disagreeable double whammy on fund managers, putting their margins under great pressure and professionalising the whole business of fund selection so that weaker firms (or funds) will find it much, much harder to be chosen. Faced with the prospect of less new business, and less revenue from the new business they can still get, AI has made what looks like a smart if somewhat downbeat decision.
Two points arise. The first, obviously, is who will be next. I don’t know, but I would be inclined to be looking in the direction of largish, probably international asset managers with large institutional businesses and small retail businesses: they’re the ones for whom “pulling back” from UK retail has most to offer and least to fear.
And then second, and perhaps more interestingly, what does AI’s pragmatic decision say about all the asset management arms of life companies who’ve all spent many years – even decades – proclaiming that no, honestly, there’s far more to us than fixed income and property, really, you’d be surprised, we’re already strong in equities and committed to building a world-class capability? What it says, I think, is that with a couple of conspicuous exceptions, we don’t really buy it. On the whole, life company equity investment people will be cursing AVIVA Investors this week. There’s not much doubting the implication of their pull-back – that if you’re looking for equity investment performance, the asset management arm of a life company probably isn’t the place you’ll find it.