Alexander Forbes (AF) has had an intriguing evolution. It was once the place to go for objective advice on product providers. It moved from there to pension fund administration, another low-margin activity. In what I consider a lapse of ethics it used the credibility it had built up as a trusted adviser to shoehorn clients into group products, notably Investment Solutions (IS).
If a fund is looking for a travel agent, look no further. IS has been brilliant at planning trips to Russia and China, not to mention the annual Chartered Financial Analyst (CFA) junket.
But as a fund aggregator IS has its shortcomings, as even the Alexander Forbes multimanager survey shows. Over three years it has been bottom of the pure equity and absolute return categories, for example. Maybe it should change its name to Investment Problems. The former head of AF, Edward Kieswetter, should have encouraged the consultants to move business when it was in the interest of their clients. But he pushed for aggressive cross-selling, in what looks like a breach of fiduciary responsibility. Can AF Consultants & Actuaries maintain credibility as little more than the IS agency force? How often have they put other multimanagers in front of clients?
Apparently Momentum has been given the honour occasionally. But IS’s main rival, Sygnia, has never had a look-in. In a long-delayed reaction to Sygnia’s success it recently introduced its own passive investment products, but Sygnia’s active products are also almost all ahead of their IS counterparts. To be fair to IS, we should give the new chief investment officer, Mark Lindheim, the chance to address the issues. Unlike previous CIOs I could mention, you won’t see him in every gift shop from Moscow to Mumbai while there are pressing matters at home: the threat from Sygnia should have been identified years ago. Sygnia’s founder, Magda Wierzycka, was a former AF consultant, and was a formidable asset gatherer at Coronation.
The market must believe that not everything is going well as AF has lost a quarter of its value over the past year. AF could certainly go a few hundred metres down the road to the Peregrine/Citadel building to get some tips. I like the fact that the Peregrine CE, Jonathan Hertz, isn’t necessarily the highest earner. That honour goes to the operators on the ground who have brought in the most money.
This contrasts with AF, where Kieswetter’s remuneration was a multiple of anyone else’s.