InvestmentEurope recently caught up with Kelly Young, senior vice president and managing director of Acadian Asset Management UK (Ltd), one of two investment advisory affiliates of Acadian Asset Management, LLC, the $71bn Boston, US, headquartered manager, which itself is a subsidiary of London, UK, based Old Mutual.
Acadian offers equity, long/short, managed volatility and fixed income strategies to investors, and is looking to push out its quantitative management business across Europe from its local headquarters for the region in London’s City.
IE: Has Acadian’s development as an asset manager been any different from the way others have grown their businesses?
KY: I can’t really comment on others’ history, which you and they probably know better than we do. However, the whole of our business was born out of the conviction that investors are not always rational and that consequently markets are not efficient. This observation itself may not be especially new, but the advent of increasingly sophisticated computer technology in the late 80s and beyond meant that it became possible to build a computer-based process which captured the same drivers of return which traditional fund managers identified (and maybe more), while at the same time eliminating the human emotion which can so distort investor decisions.
It is probably a fair bet that most fund managers started by managing assets in their home market, where they would back themselves to have the deepest and broadest expertise. Acadian was the reverse of this, realising that home bias was preventing investors from accessing the broadest opportunity set as well as creating an undue concentration of risk in one country. Acadian’s first active strategy was non-US all cap, launched in 1988. Thus it was deliberately pitched at US investors looking to reduce home bias.
We are highly collaborative in our approach. No doubt every manager wants to produce strategies for which there is a demand, and no doubt they will do market research to ensure they get it right. We think that perhaps we take this process further in that some of our strategies have been originally designed with specific clients in mind, following detailed discussions with them. A new product is therefore often the result of a genuine partnership with the investor. After the non-US all cap strategy gained traction, we responded to the needs of a US public fund who encouraged us to add US equities and create a genuinely global strategy. Thus our global strategy was born in 1992 and it has been a mainstay of Acadian’s business for much of the period since. Our long short strategies were also originated as a result of discussions with a client who was interested to consider the extent to which our process could identify not just the best stocks but also the worst. We also look for compliments to our existing strategies to be able to offer fuller solutions to our clients (an example of this is extending our coverage within the EM space outside of our core offering, going deeper into the asset class with EM small cap, and outside of it with frontier equities and emerging market debt.
IE: How did you get to the Acadian name and brand, and what is its significance?
KY: Acadian’s founders all have family or educational roots in New England (US), and we have always been drawn to this region’s inspiring history and outstanding natural beauty. Acadia National Park is a particularly magnificent New England landscape, with rugged and diverse terrain and a long history of exploration, enterprise and philanthropy. We deeply embrace these values. The view from Acadia’s mountains takes in some of the broadest vistas on the East Coast, which seems a fitting metaphor for the vision and reach we aspire to in Acadian’s investment process and our service to clients.
IE: You have built an office presence to include Boston, London, Singapore and Japan, but how are you using these to build your European presence?
KY: Over the past three to five years we’ve tried – successfully – to grow the London office to be in a position to be more autonomous. In addition to sales and client service support, which has been the backbone of Acadian’s European operations since we opened the office, we also have dedicated investment management expertise, as well as important legal and product management support. We expect to see continued expansion in 2015.
IE: Can you outline the business focus and the impact this has in terms of, for example, products you are seeking to offer?
KY: Our focus falls down two lines; clients and products. In terms of client focus will may look to expand into Southern Europe over the next 12 to 18 months, and will certainly be increasing our focus on Switzerland and Germany. The UK and Nordic regions will continue to be of great importance to us in the coming year and we expect on-going focus to these regions.
In terms of products, 2014 was a year of expansion for the Ucits platform, and an important one in allowing us to offer more niche strategies to clients in addition to the more ‘core’ type of strategy.
We have done a good job in gathering assets in these funds, but those efforts will continue into 2015 to ensure critical mass. We think risk will be at the forefront of investors’ minds in the coming year and in terms of product demand, managed volatility is an area we think has real opportunity for further growth. Within this strategy, we manage approximately $10bn in assets globally, and as we move into more uncertain markets, the downside protection that this type of strategy offers will undoubtedly capture the imagination more and more now that this type of approach has gained broad acceptance.
Similarly we think the market neutral strategy will be an area of focus in 2015. With more negative views on markets in general there is more demand for non-directional long/short strategies. For investors who are able to invest in long/short we think our global diversified approach to market neutral makes real sense. Having this strategy available in a Ucits format will, we hope, bring a benefit to a number of investors looking for a sophisticated market neutral strategy but with the benefit of additional liquidity versus offshore structures.
IE: What are your priorities in areas such as client segmentation, product types and identifying possible gaps in the current lineup?
KY: We want to be able to offer best ‘in class’ solutions to our clients. The Ucits platform is an important piece of that and the expansion of it – either by new funds, or additional share classes and country registrations – will be important in giving us the ability to do that. I don’t think there is an obvious gap in our line up currently, but the beauty of a quantitative approach such as ours is that it can be tailored and extended to suit a client’s particular need, so we have the flexibility to offer variations on our current strategies.
Our range of clients is extensive, across country and market segment. We have successfully entered into partnerships with some of the larger banks and wealth managers in Europe, which has also diversified our client base. In terms of country focus, we plan to increase the existing focus on Switzerland and Germany, and may look to expand into Southern Europe, a less traditional area for us.
We view our business as exclusively institutional. Although some of our clients distribute our strategies into the retail space this isn’t an area Acadian services directly
IE: Are you looking to develop any new products?
KY: We are always looking to develop new products, partly because we are of course a commercial organisation which wants to grow and get better, and partly because we still look to develop collaborative relationships with our clients and prospects.
Usually these feed to some extent off existing capabilities and strategies. Sometimes we recognise an area of expertise where, if we were to master it, we would be able to add value to our existing process and/or develop a stand-alone strategy. Sometimes we are approached by clients and prospects who know that we have (a) a huge database of markets, stocks, economies etc and (b) a highly talented team of investment professionals who are able to tailor portfolios to meet client’s specific needs . In general the investment management market is highly dynamic, and Acadian is full of very interested and curious people, so ideas are constantly being generated as to what might be interesting and profitable to do.
IE: How might your European presence change in future?
We currently have clients in 12 European countries. Traditionally Acadian’s presence has been focused on Northern Europe but this has shifted somewhat in the last 12 to 18 months, and in addition to continuing to go deeper into our existing markets, we may focus more on Southern Europe, Italy and Spain in particular.
We are always looking for ways to expand our existing offering to clients, be it through extensions of our existing core approach, through new strategies which operate independently of our core model (such as emerging market debt) or through vehicle type. We launched three new Ucits funds in 2014; an Emerging Market Managed Volatility fund, Emerging Markets Small Cap fund and an Global Equity Leveraged Market Neutral fund, and we were delighted to be able to bring three of our newer, and highly successful, strategies to the European market place in Ucits form.
IE: Are you looking to add any particular people skills across functions such as portfolio management, but also around, for example, the mid and back office areas?
KY: We have recently added dedicated legal and compliance support for the European office and are in the process of adding additional product management support for our Ucits offering, which will also be based in London. We have had investment expertise based in London for the last 18 months, but we may look to expand on this further in the next 12 to 18 months. Outsourcing can be important for a firm, especially in the ‘start-up’ phase, but for an office of our size, and with the support of our US headquarters, we wouldn’t imagine outsourcing further at this point, and probably the reverse.
Key business data
|Global AUM as of 30 November, 2014||$71bn|
|Euorpe AUM as of 30 November, 2014||$13bn|
|Acadian Asset Management, LLC (Acadian) is headquartered in Boston, Massachusetts and registered as an investment advisor with the U.S. Securities and Exchange Commission. The firm is a subsidiary of Old Mutual Asset Managers (US), LLC, which is an indirectly wholly-owned subsidiary of Old Mutual plc, a London-based financial services firm.
Acadian has two wholly-owned investment advisory affiliates.Acadian Asset Management (Singapore) Pte Ltd ((Company Registration No: 199902125D) is located in Singapore and is registered with the Monetary Authority of Singapore. Acadian Asset Management (UK) Ltd (Company Registration No: 05644066) is located in London and is authorized and regulated by the Financial Conduct Authority.Acadian exercises complete discretion over its investment philosophy, people and process, and Acadian is operated as a single independent entity. Acadian has been a subsidiary of Old Mutual since 2000, when Old Mutual purchased Acadian’s former parent, United Asset Management.