Oct 22 2008

Hendrik’s view on how things will change

Published by at 7:37 am under Companies,Top Stories

The Dow Jones website eFinancialnews interviewed Hendrik du Toit, CEO of Investec Asset Management (IAM), in London last Sunday on how he saw the financial landscape going forward.  

I reduced what was published on Monday to its essence (because only paying users of the site have access to the article) and republish the most important quotes here – each idea, or topic in a separate paragraph and in italics:  

“Simplicity will be the key to success, because few investors will get involved with products they did not understand.” 

“As an industry we have to tell people exactly what they are buying and I think we are not doing that. This will have to change. Innovation doesn’t always have to mean highly complicated products.” 

On the financial landscape after the crisis: “People will realise they do not have to be in New York or London to be successful in finance and that by being spread out further across the globe, they will have better access to and a better understanding of their clients. The cost of being based in the established financial centres have become prohibitive for some companies reeling from the credit crunch. Du Toit expects several smaller hot spots will appear on the financial map. He said this model was already working across the US, where managers were spread across big cities and performing as competitively as those in the traditional financial hubs. A company needs skills and talent. It can work out of anywhere. Some emerging market economies now have settlement processes and regulation equal to that in the developed world. This is going to level out the playing field. Teams putting together products should stay in the same regions or time zones for practical reasons, but this does not necessarily mean mass emigration to one particular city.”

On the future of the hedge funds: “He said he could not see the hedge fund and more traditional asset management model continuing in separate veins.  While he believes there will always be a place for different types of manager, because of manager preference for larger managers or boutiques, he foresees a convergence of the two sectors.”

“Du Toit predicts more casualties before the crisis was over, as investors became less risk averse and more weary of claims of overperformance.” 

“He said the absolute return promise would be questioned, with managers and investors having to become more realistic about what they can expect to achieve. Investment firms would be responsible for focussing clients’ minds on long-term total returns, and managing their perceptions of the possible downside, rather than being swayed by short-term, volatile performance.” 

“Investec was looking to multi-asset products and diversifying its client base, having pushed into Germany and Austria.” 

“He advised governments not to overregulate the fund management industry. We did not cause the crisis. Do not kill this golden goose, he said.” 

“The crisis will not end quickly, but the asset management industry will survive. As in any shake-up, poorly-performing players will fail, but well-run companies will profit from the opportunities. There are going to be some excellent people on the street, as companies shed staff and they will have to be reabsorbed into the remaining firms.”

PS. Here is an even better article (from the Reuters site) on the same topic (how will the asset management business be changed by the banking crisis) after an interview with Hendrik du Toit on 24/10/2008.

One response so far

One Response to “Hendrik’s view on how things will change”

  1. adminon 23 Oct 2008 at 9:11 pm

    As someone who lives in Germany and follows the German media, my bet is that Hendrik’s “request” to governments not to “overregulate” the asset management industry will fall on deaf ears. From my vantage point, it seems as if a united Continental Europe (with a number of heavy-weight backers from far away, such as China) will dictate the terms of the “new banking system” on the 15th of November and the weeks thereafter, overriding the US and UK in a tussle which will, at times, get very ugly. In the end the new system will have been “made on the Continent”. It’ll be a system which leaves much less “playing room” for asset managers to jack up the returns for their clients.


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