Be it working together as a business for the good of clients, as different companies to a similar end, or as a sector for the good of society, Ferdi van Heerden is a big believer in the power of partnership.
“As a business, we are focused on what we call ‘advice-led investing’, so we firmly believe in engagement between asset managers and advisers to reach the right outcomes for clients,” says the Momentum Global Investment Management CEO.
“But it actually goes beyond asset managers, advisers and end-investors, right? It is absolutely critical for the broader industry – advisers at the front end, fund platforms and product wrappers in the middle, and asset managers at the back – to really operate in a strong symbiosis so we can deliver on outcomes for investors in the way they expect them to be delivered.
“As businesses, we often fight for our own little piece in the value chain, but, the more we can work together and be collegiate in these relationships, the stronger the outcomes will be for investors, which must be the end-goal for all of us. And, maybe also the stronger the influence we can collectively have in society. Increasingly, that has to be the other bigger purpose for everyone in our industry, and definitely for asset managers.
“At Momentum, we believe one of our core USPs is the way we engage with our adviser partners. We call them that because it really is a partnership. That is both a business decision and, through Prod, in effect, a regulatory requirement. We have to understand the target market and make sure we collectively deliver what advisers need for their clients.
“So, we have always prided ourselves on the accessibility we offer advisers – to portfolio managers, top management and so on – and this partnership approach extends elsewhere. How, for example, can we work with platforms to make sure what gets delivered is what everyone was expecting? These partnerships are critical, the way you engage with them and the integrity you have in those conversations. This is a relationship business.”
Van Heerden joined Momentum in his current role in August 2010, after three years at the helm of a start-up insurance venture in Switzerland. Before that, he held senior positions at two South African financial services giants, the FirstRand Group and then Momentum Metropolitan Holdings Limited, of which Momentum is a UK-based subsidiary. How does that set-up suit the company?
“Being wholly owned by a listed entity while operating in a market away from where that entity is based gives us the security of a strong parent and the comfort of a long-term focus,” Van Heerden replies.
“Momentum Metropolitan does not buy and sell businesses, it invests in them for the long term. So, while we quite rightly have to deliver on annual financial outcomes, we never feel pressure to act with a short-term mindset for the sake of achieving short-term revenue targets.
“At the same time, being a fairly small company in the UK market allows us really to take ownership of what we do and almost behave like a self-owned nimble business, a ‘boutique’, if you like, although it is not a word I typically use. Taken together, that means we can get on with what we need to do while not having to compromise long-term benefits and outcomes for the sake of short-term financial gain.”
Sense of trust
When it comes to building Momentum as a brand, Van Heerden is less interested in looking to leverage the name of the South African parent than building a sense of trust. “Brand is no longer about giant billboards,” he says. “That can be part of it, of course, but, for us, the far more important consideration is the way we partner and engage with all of the entities that touch us and whom we touch.
“We have to do what we say we will, that is key for a brand. Momentum has to equal trustworthiness. We must bring sustainability and confidence to our clients and demonstrate we will work as hard as it takes to achieve the right outcomes for our clients and our partners. How we manage money is all about making sure we can deliver on the journey and on the financial wellbeing of clients, in partnership with their advisers.
“In this, our greatest asset is our people. For me, the Momentum brand is the 65 or so people in the UK and how we deliver solutions to clients. In turn, our people must live the values and culture, and that reflects who we are as a business. Values determine how your people behave and, because culture is really just collective behaviour, that becomes the company’s culture, right?
“Most firms have defined values, but it is how you arrive at those values that really counts. Our stated values are as you might expect: accountability; diversity; excellence; innovation; integrity and teamwork. As a business, the journey of getting to those values and the discussions we have had on them – in teams and in smaller businesses and with new people – was so important.
“And then the culture we aspire to have would, of course, come from living those values. If I have to put words around what it means for me, in our business in the UK, it is making sure we are a confident business, but never arrogant. And, we are accessible to whoever wants to speak to us, while recognising no one has all the answers, but you do your best to go and find the answers.
“It is also about a ‘can do’ attitude – let’s make things happen – and being non-hierarchical, which means inclusiveness of debate. Maybe that is a luxury of being a smaller business. I recognise a bigger business may need a bit more hierarchy, but, with 65 or so people, it is pretty easy to make sure our expectation is openness, debate and knowing that, from the day you join, you have a voice.
“Finally, the client is important, and we do not easily accept a service failure in the business. We will have hard discussions, because we hold ourselves to a high standard in that respect. In an investment business where we look after people’s money and have to allocate it properly – to the benefit of our investors and, increasingly, society – we have to behave with integrity and with morality. Culture is absolutely key in that.”
As a provider of model portfolios and multi-asset funds, to what extent is Momentum now hunting beyond the more traditional asset classes? “When you are asset allocating and managing risk profiles in a diversified space, you have to look far more broadly than just equities and bonds,” says Van Heerden.
“To put it another way, we are now aiming to diversify the diversifiers.
“Assets we would think of as uncorrelated in the past have become a lot more correlated in recent times, and that may well change again in the future. Certainly, though, the role of liquid alternatives, property, real assets, infrastructure – even how to gain access to private markets in certain portfolios – are becoming increasingly important considerations, albeit they need balancing and managing into appropriate liquidity outcomes.”
In a UK context, Van Heerden sees investment trusts as a good way to do this. “You have to find the right trusts with the right liquidity mechanisms in them and of an appropriate size for your portfolio,” he adds. “But then this becomes a really nice mechanism, specifically from a UK market perspective, where we can access some investments in the infrastructure space and so forth.”
Expanding on how the company monitors liquidity and governance within its portfolios, Van Heerden says: “We look at the number of days in which we can liquidate an entire portfolio at various levels, for example, and we do some stress testing around those. As a business, we want to make sure, if something were to happen, we can liquidate, if not 100%, then a fairly large percentage of the portfolio in good time and under stressed situations.
“As for governance, whether we are looking at fund managers or underlying holdings or investment trusts or our own governance structures, it is a hygiene factor that has to be in place. So, we ask deep questions on governance and, when we look at our investee companies or the managers we use, that is the foremost part of our research focus. Governance has to be in place or else we cannot go there.”
Looking to the future, which sorts of companies does Van Heerden see emerging as the winners of asset management over the next decade or so? “The ones with a fair blend of IQ, EQ and AQ,” he replies. “And, by that, I mean with the right intelligence levels, the appropriate emotional focus – that is to say, the right levels of humanity – and the ability to adapt.
“The world will change pretty fast over the next decade and so adaptability will be key, but it will also be important how you deal with change emotionally. And then, over that, the winning businesses will have an understanding of why they do things, what their true purpose is. If you have a purpose, you can navigate through all kinds of challenges and changes.
“So, businesses that do things for the right reasons; businesses with resilient and adaptable business models; and businesses with strong cultures. But they must also have an open mind in regard to technology, to the requirements of clients and to the need for the sector to play a societal role. Businesses that are forward-thinking in all of those areas are the ones that will be successful.”
What is the best piece of advice you have ever been given?
When I started my career, I was told always to look to ‘out work and out think’ my peers
What is your ‘top tip’ for professional investors to help them run a better business?
Surround yourself with good people, have a team-based focus and ensure you have high levels of integrity and empathy, in short: ‘partner well’.
What single issue should most concern professional investors at present?
A world that is unequal and uncertain geopolitically. It is not a new concern but how we navigate through that is certainly becoming more relevant for all of us.
Does anything about your job keep you awake at night?
If there is one thing that worries me as an investor, it is the ease with which people invest in crypto versus funds, and we need to fix that. How we appeal as service providers to end-clients is a whole conversation on its own. We have to communicate properly what we offer and the benefits of investors staying the course over time rather than hoping for a quick win. If, as an industry, we can make sure people are comfortable with the journey and see us as trustworthy, then we should win out, but we should not underestimate the ease with which you can invest in cryptocurrency versus an investment in the regulated industry. We need some introspection there.
And what most excites you about your job?
First, the fantastic people you get to work with in this industry and, second, the role and responsibility we have in society as asset allocators with the knowledge we can genuinely
make a difference.
If you were in charge of the FCA, what would be your priority?
Regulators should lead by example. As a CEO, one of my key areas of focus is ensuring a strong skillset and culture so we can deliver as a business, and it should be no different for the FCA.
And what advice would you give to someone starting out in investment today?
The same as I was given, but acknowledging the world has changed. So, out work and out think, but with a strong degree of empathy in the way you do that.
“Looking to the long term, ESG is just something we all have to focus on, it is now part of the investment environment, but, to succeed, it has be an integrated approach,” asserts Van Heerden.
“Climate is clearly a risk, and, in a similar way, global inequality is clearly an issue. Therefore, social pressures are almost on the flipside of simply investing for a greener world. Overly focusing on the green agenda through exclusion could, for example, have a massive impact on employment in emerging economies in Africa.
“So, fairness and the focus on a ‘just transition’ are very important considerations here and there has to be an integrated approach. However, if we are to successfully invest for a sustainable and greener future, one of the things that we as a broad industry should be looking to solve is getting the terminology, wording and definitions of ESG right and consistent. That way, you could almost look through any portfolio and start measuring across the different components of sustainability and ESG.
“As an investment company operating in multiple markets, one thing that really causes us challenges at the moment is the different taxonomies across different markets. That means, even if we create a building block that could work in all our multi-asset solutions across the world, the EU might approach it in a slightly different way to the UK, and then there could be slightly different interpretations again in the US and other markets.
“For us as a business, then, it is key that regulators and investment associations, and maybe also those that track and measure the ESG credentials of different investee companies, get together and actually develop a far more consistent measurement regime that we can all apply at an investee company level. And then we, as investors, have to make sure we allocate capital in the right way – and also engage in the right way.”
In that regard, Van Heerden sees a purely exclusionary process of engagement as something of a cop-out.
“We would much rather engage actively and only exit an investment as a last resort, if we see there is no real change in a particular business,” he continues. “We have to be part of the changing agenda and so we must be proactive in our engagement.
“We should not shy away from that, although I would say multiple voices are better than single ones. We need to pursue key areas of engagement as an industry and, if we can use a body like the Investment Association to guide that sort of thinking, then that would be helpful. Collectively, we can make a really meaningful impact on the world to facilitate change.”
THE ART OF POSSIBILITY
Technological innovation and asset management are not always seen as natural bedfellows but, back in 2018, the Investment Association (IA) set about addressing that with an initiative that began life with the whizzy name of ‘Velocity’. Now, rechristened as the more solid ‘Engine’, its self-declared mission is “to fuel the adoption of technology within investment management, for the benefit and changing needs of clients”.
“To remain globally competitive, the UK investment management industry must be restless in its quest for innovation and reinvention,” IA CEO Chris Cummings has noted. To that end, Engine has so far worked with more than 140 fintech firms and partners “across the investment value chain to open up tech-driven possibilities and solve the challenges faced by investment firms, both big and small”.
“Engine exists to identify new thinking and solutions in the tech space and bring them to life within the broader asset management community,” says Ferdi van Heerden, who sits on the initiative’s advisory panel. “It has touched so many fintech businesses and it touches aspects of our broader business, not just investment but distribution, the regulatory space and operational resilience.
“Being at the ‘back end’ of the wealth management value chain, asset management companies will often say, well, we need a portfolio management system, an order management system, some analytical tools and then we are good to go, but tech is becoming far more critical than that.
“As businesses, for example, we need to be exploring the extent to which artificial intelligence can enhance the focus of our investment research. After all, you can do many more calculations and analytics through the algorithms an AI solution can provide, testing correlations and non-correlations between different asset classes, say, and flagging up ideas or warnings. We need to operate far more on the frontiers of where technology is going. Unless we can tap into that and adopt a more flexible approach to technology, we will lose out as an industry. We risk becoming dinosaurs.”
For Van Heerden, ‘open banking’ is an important indicator of the direction of travel for financial services.
“This has opened up the landscape in how people can provide access to their banking information and move between their products,” he says. “And the next phase of that is going to be open finance in a broader sense, which means opening up how information can be delivered to clients. Unless we have the capability to engage with technology companies and fintech businesses at that level, asset managers will get left behind. We need to spend more time thinking about our technology agenda, not only in the back end, like with AI, but also what it means for how we engage with clients via potential future open-architecture fund platforms.
“Another interesting area is, in the same way AI can help amplify our decision-making and offer earlier warnings, there are some fascinating outcomes coming to the fore on how natural language processing can offer earlier warnings on governance issues – fast-track insights into what might be coming down the line and just focusing attention on a specific item or investee company.”
Technology is not only vital in helping asset managers deliver to clients but, adds Van Heerden, it is key to drawing in the next generation of investors.
“If we are perceived as a staid old industry, we will have trouble attracting younger people. Crypto has really attracted people’s attention – I would argue for the wrong reasons – but maybe it is because it is so easy to buy some cryptocurrency versus how difficult it often is to buy an investment fund. So, we have got to think how we deliver appropriate solutions in an efficient way to clients and in ways that they want – which will change massively over the next 10 years.”
So how would Van Heerden characterise his role with Engine? “There are about 20 people sitting on the advisory panel and we just consider how we can enable, facilitate and expose fintech businesses to the broader asset management sector,” he replies. “There are some really good things happening in trying to focus on what, at Momentum, we call ‘the art of possibility’.
“Unless you investigate, you will not see what the art of technological possibility can be and that is where, as businesses, we need to get engagement. Often, in IT development, you identify a ‘problem statement’ and then try to solve that, but the problem statements new fintech companies will solve do not exist in our framework today. We need to explore, understand and participate to deliver better outcomes for clients.”