Columbia Threadneedle chief investment officer Mark Burgess talks the future of active investing, managing fund managers, and West Ham United, with Richard Romer-Lee ...
What makes a good fund manager?
Most of the very best fund managers are strange people, quite eccentric. They need a huge amount of self-confidence - as most of the time they are saying the market is wrong. They need intellectual curiosity and a great sense of humour - it helps!
What's it like managing fund managers?
I sometimes wonder what I must have done to have 150 investment professionals working for me. It's not easy. While it requires lots of structure as one can't have 150 direct reports, it's important to have some form of personal relationship with everyone on the investment floor. I make time to talk to them about markets and their lives - the latter is so important as it can affect how they perform.
How important are ESG factors in asset management?
These factors are such a driving force of market returns. We must integrate and embrace them. Whether you are investing in equities or in bonds, traditional financial analysis would assess risks to those cashflows, for example disruptive technology, new entrants and regulatory risks. ESG sits alongside these. Are companies conducting themselves in ways that are unsustainable? Are the incentives for the management team misaligned with the long-term interests of the company? So many issues have been down to ESG considerations - Wells Fargo fraud, dieselgate, BP to name a few.
What do you hope to achieve as chair of the Investment Association's Investment Committee?
To help the industry navigate some enormous challenges, not least those coming from regulation. The regulator is trying to do the right thing, but maybe not always in the right way. We need to improve the public perception of us. Being in fund management is the best job in the world. We meet extraordinary and influential people, we observe world affairs up close and personal, we interact with the leading companies of the world and get to understand their businesses. We also need to be more effective in lobbying the government - where was our industry's voice in the run up to the global financial crisis?
How do you motivate and retain fund managers?
It is important that when people come to work they like their job, their colleagues, critically that they like their boss. They need a career path to which they can aspire, cultural empathy and to be paid competitively. Large egos are not required. This is a tough job - the enemy should be outside the building, not within.
What does being part of Columbia bring?
Threadneedle has always had a strong culture. Although Columbia is largely a domestically focused business in North America, it has enormous resources and a global reach, which we can now tap into. It enables us to have a deeper and broader understanding of many markets and the ability to have greater insights, for example in fixed interest markets, is considerable. Scale, internal resources and an international business help, especially given the regulatory agenda, which is gifting a competitive advantage to larger companies, and the impact of MiFID II and sell-side research being de-skilled.
What's the most extraordinary thing you have seen?
The global financial crisis was pretty extreme. Northern Rock was apparently a low-risk, sleepy mortgage lender brought to its knees in a matter of days. I met with a senior executive of a large and well-known business, who responded to my question of could there being any circumstance in which they might need more capital with a resounding no. Six weeks later came a rescue rights issue. The incompetence and/or deceit in various companies and the fragility of the financial system was truly extraordinary. It's equally extraordinary to think that the regulator, market and shareholders all thought it was okay that RBS was 77 times levered in the aftermath of its takeover of ABN Amro.
What does the future hold for active managers?
Active managers will have to demonstrate value for money and not confuse value with cost. That means producing considerable and material returns above benchmarks, net of fees.
What is your view on where we are in the economic cycle?
The world is very indebted. Tomorrow's consumption has and continues to be brought forward to today. That could mean decades of low growth, low inflation and low interest rates, which should be okay for markets. Risk assets shouldn't be threatened. But the geopolitical backdrop is quite lively - if a market event is looming, this could well be the cause of it. The financial system is largely appropriately capitalised.
What do you do outside work?
I grew up in the East End of London and am inflicted with a lifelong passion for West Ham United. I am a season ticket holder and watch them with my brother and other members of the family. I also have a passion for cooking, eating and drinking. I do most of the cooking for family and friends, and for our two teenage daughters and often their friends too. My signature dish is chateaubriand with bearnaise sauce.
Richard Romer-Lee is managing director of Square Mile. You can read more Talking Withs here
Search for replacement has started
Getting rid of gibberish
Combined five decades’ experience
Bannister oversaw Standard Life acquisition
Three new non-exec members
The government will reintroduce the pension schemes bill as part of an “ambitious programme of domestic reform”, the Queen’s Speech confirmed today.
Benefits could go to 100%
Misuse of audio feed