Chief executive JIM Sutcliffe explains how the business has changed over the past three years and why the group will continue to back selestia
For a group that has spent several years rationalising and selling off non-core assets, Old Mutual retains a wide range of businesses in the UK.
Old Mutual Securities, Corporate Stakeholder and GNI have been disposed of but the group retains Old Mutual Asset Management (OMAM), private client business Gerrards and consolidation platform Selestia.
Old Mutual group chief executive Jim Sutcliffe talks to Investment Week on how the business has changed its shape over the past three years and why he is confident it can develop its three brands in the future.
Sutcliffe reiterates Old Mutual's commitment to backing Selestia through to financial independence. He refutes suggestions potential clients may be put off by the number of corporate changes seen at the group in recent years and argues OMAM forms a solid base for the South-African owned financial services group's UK operations.
How does Selestia fit into Old Mutual's distribution strategy?
We are trying to build a business with three legs, South Africa, UK and US. South Africa is our largest market and we are looking to bring the other two markets up to the same scale.
The Selestia systems were built by our South African IT people to our UK team's specifications. Intermediaries are the most important segment of the market for us and what our customers want is the open architecture of Selestia, whether they are called IFAs or fee-based advisers.
Are you committed to funding Selestia through to profitability?
We have got a business plan we are comfortable will produce the necessary internal rate of return. The dynamics of OMAM and Selestia are such that relatively little capital will need to be applied once we get past the initial cash injection.
We are committed to putting that capital up and are clear what is the break-even level. Every quarter, we have produced significantly greater sales than the last and on the back of our sales record, we can be comfortable Selestia can get to break-even in two to three years. We have not proved we will make a lot of money but we have not proved we will not either.
Clearly the markets have not helped Selestia's bid to amass funds under management. Is this leading you to chase the top end of the intermediary market?
If a business model depends on the markets being good, you shoot the business model in the head. I do not regard lousy markets as an excuse for everything. In lousy markets, buyers are more discerning and if you have a good product, you should benefit.
Is it your aim that Selestia will always be a brand distinct from Old Mutual?
We have had a lot of debate internally and everyone has got their own opinion. I am happy we have got separate brands like OMAM, Selestia and Gerrard, because they reflect the different businesses we are operating.
The endorsement of Old Mutual at the bottom of the page is not just about reassuring users there is a FTSE 100 company behind Selestia. It is about building the Old Mutual group's image too because if intermediaries are happy with Selestia, it adds value to Old Mutual.
I like finding ways to associate Selestia with the Old Mutual name more strongly and although we probably won't change the name, we may change the logo to that effect.
Do you think intermediaries will be put off from buying Old Mutual funds by the amount of changes the business has undergone of late?
At the plc level, all of the chopping and changing was really carried out in 2000 and 2001 when we sold a number of non-asset management businesses, such as Old Mutual Securities, Corporate Stakeholder and GNI. Hopefully, those watching carefully would have seen this as us focusing on our core strengths. I hope clients would say we take action when things are not working.
For example, on the European equity desk ' European equity manager Adrian Farthing and his team departed in favour of a return to a quants process last year ' the funds were not performing and although we do not want to be seen as ruthless, we are performance-orientated.
Is the OMAM investment philosophy consistent when some funds are actively managed and others quants-driven?
The original range was a quants shop. Some of the older funds are still quants driven but the newer ones are actively managed.
The OMAM team has been pretty stable, with names such as John Ainsworth, UK chief executive, Peter Baxter, chief investment officer, and Ashton Bradbury, head of UK equities. These have been here since 2000 and are tied into the business on three-year bonus plans.
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