In the competitive world of global equities strategies it is increasingly difficult to stand out from the crowd. In Europe and Asia Pacific, for instance, Mercer Investment Consulting lists nearly 200 global equities managers offering their services to institutional clients.
So, when there’s a new(ish) entrant to the market, there is reason for a raft of responses, from celebration for the additional investment opportunities through to questioning their business senses.
Henderson Global Investors, not a new name to the Australian landscape, officially opened its doors in Sydney last week for a fully fledged tilt at providing global equities strategies to super funds. Henderson has hired two big names in the business, Rob Adams and Matt Gaden, to lead the charge.
Adams, the chief executive for Australia, said Henderson would do a “mix of buy and build” to fill out its Australian business, with the decisions on what asset classes, including Australian equities, still to be decided. Global equities, with the distinct Henderson style, is already being marketed.
Adams built up Colonial Group’s operation, First State, in the UK in the early part of the 2000s, alongside his head of distribution, Gaden. They were known around London at the time as the ‘wild colonial boys’, not so much for vigorous socialising but rather for their successfully aggressive marketing. They had come off the back of 10 boom years at Colonial First State in Australia and carried that swagger with them to the UK.
Joining them at the opening in Sydney last week were global chief executive, Andrew Formica, and head of global equities, Matthew Beesley. Formica is an Australian who came to Henderson via AMP.
The Australian connection with Henderson goes back a ways. AMP used to own it, and remains a minority shareholder through some of its portfolio holdings, but decided to float it off in 2003. The biggest shareholder in the publicly listed company is Australia’s Perpetual Trustees. The second-biggest, as a block, is the staff. About 65 per cent of the registry is Australian.
Adams said that on the “buy side” of the firm’s plans, there would possibly be one or two acquisitions of Australian-owned boutiques with an equity bias. He said: “We will look at opportunities to build manufacturing in Australia, either by team lift-outs or buying into the right sort of businesses. We are interested in contemporary investment capabilities, preferably with global utility.”
Andrew Formica, who took over the top job at Henderson five years ago, said at the Sydney launch that the firm had always planned to re-enter the Australian market, because it was “part of our heritage”.
“We got distracted with some acquisitions,” he said, such as Gartmore, which has made Henderson the leading retail manager in the UK.
In terms of the firm’s initial offering in Australia, Beesley said the Henderson style of global equities management was fairly distinct. The six portfolio managers, including himself, were “generalists” who, when they found an interesting situation, became “deeply analytical”.
“I think the markets are only semi-efficient,” he said. “Investors do a bad job when businesses are changing. When change occurs, investors are slow to understand that change. People don’t like change. When it’s happening they think it’s incremental… If you spend time looking for change, you are likely to find misplaced value.”
Henderson’s process involves the application of what it calls an “eco systems analysis”. When one of the team finds a company which offering a great source of information on change, usually through the company’s management, this insight is taken through a process of analysis of the whole “eco system” surrounding that company. This includes studying peers, regulators and customers to try to validate the insight.
Beesley says that if a firm is set up on a geographical basis, with analysts covering regions, such analysis is difficult to do. As an example, he says, to analyse Qantas as a stock, you look at airlines, under the MSCI index sub-set, and then hotels under the “consumers” index subset and then, perhaps, American Express, the world’s largest booker of hotels and travel, under the “financials” index subset. These will most often have different analysts assigned.
Henderson’s Australian offering is of a concentrated global portfolio of about 30-40 stocks. The manager aims to make a return of at least 50 per cent over two-three years on each investment. The team looks for two-three new ideas, each, per year.
The portfolio is equal-weighted, at about 3 per cent per stock, which , as Beesley puts it: “removes the portfolio construction conversation”.