Raquel Pichardo-Allison speaks to Robeco CEO Roderick Munsters about his plans to create a more efficient firm and to swell institutional assets
Robeco’s chief executive officer’s pension fund roots are showing through as he moves to reposition the Dutch firm as more than just an asset manager. Roderick Munsters, who recently celebrated his first year as CEO, is looking to create a leaner firm that depends more on high-margin businesses and a more holistic firm that provides portfolio advice.
The facelift is part of Munster’s plan to bring Robeco back into the black. The firm posted its first loss in its history in 2009, and Munsters quickly set out to reduce costs and refocus on the most profitable parts of the business. So far, he’s on course.
Munsters said he’s sticking to a ‘select, cut and grow’ strategy, where certain products would be culled from their roster. “We’ve got too complex a business where we run too many clients from too many markets with too many products,” said Munsters.
The firm already shelved plans to launch what Munsters called “the umpteenth commodities fund”, and shut down retail products linked to mortgage investments. The result, said Munsters, will be a more profitable firm, despite potentially having fewer traditional assets under management. “Assets under management may matter, but margins on such mandates are more important to us if we need to run a business,” he said.
Meanwhile, Munsters has tried to create greater ties with parent company Rabobank which will help the firm in two ways: Robeco can form partnerships with the bank’s clients and niche products can be developed off the back of the bank’s research capabilities.
“(Rabobank) of course has good relations with food and agricultural corporates globally, and they all have pension funds that need to be managed. They need advice. So our strategy is not just to see a product, but to provide a client with advice on how to run a pension, how to set up a pension deal, and they’ve introduced us to a number of their clients,” said Munsters. At least one fund is already in the process of signing a deal with Robeco following an introduction from the bank.
By focusing on the advisory side of the business, he will be tapping into a growing trend among pension funds that are increasingly demanding more holistic solutions from their asset managers. He hopes this will go some way in meeting his goal of growing the institutional business to 60% from 50% by 2014.
Munsters joined Robeco in September 2009 from APG, manager of the €218bn ($302bn) Dutch pension fund ABP, where he served as chief investment officer. Prior to that, he served as investment chief at PGGM, which manages the assets of the €90.5bn Pensioenfonds Zorg en Welzijn.
With his background, it is no surprise he is steering the firm into the advisory business, advising pension funds on how to position their portfolios, as well as offering advice on products – both in-house and external. In July, parent company Rabobank hit the headlines when it repositioned its equities portfolio, decreasing the amount of assets managed in Robeco’s global enhanced equity strategy and hiring external managers. The bulk of the pension fund’s €11.5bn in assets is still run by Robeco.
“They were unhappy with the performance of that mandate for a number of years. Over a ten-year time frame, they were happy, but the last two to three years were lagging,” said Munsters. “Instead of pulling that mandate, I spent some time (with them) myself. We sat down and said, ‘What’s your worry and how can we look at that?’
“We provided them with advice on the portfolio. The solution was to end the quant mandate.”
Instead, Robeco advised the firm on a new portfolio that included Robeco’s conservative intrinsic value strategy, which is a low volatility quant strategy, and two external managers.
The Rabobank pension fund eventually hired two outside managers – AQR Capital Management and PanAgora Asset Management – to manage separate quant portfolios worth a combined €800m. Rabobank also used Syntrus Achmea as fiduciary manager.
“We delivered an advice. We did not only sell our product, but also someone else’s product. They ended up being confident in our advice. We get to charge a happy client double the fees because of a different product line-up, and so I think everybody’s happy,” said Munsters.
Globally, large asset management firms are looking at how to incorporate advisory services into their businesses, said Ben Phillips, partner at US-based Casey, Quirk and Associates.
“They’re starting to talk about this,” said Phillips. “There’s a lot of discussion about the advice-side of things.” And they’re turning to Dutch firms as an example, he added.
Robeco has invested in staff to build up this business. In August, the firm announced Tom Steenkamp would join the firm this month to co-head the investment solutions department with Artino Janssen. Steenkamp joined from APG where he was a member of the board of directors.
Meanwhile, Munsters is preparing to launch new, niche products, including an agri-business fund slated to launch early next year. The fund allows Robeco to leverage off its parent company by tapping into Rabobank’s expertise in agribusiness.
“We’re an asset management company that’s part of an AAA-rated investment bank. Trying to leverage their presence is something we’ve spent time looking at,” said Munsters.
This week's edition of Professional Pensions is out now
Collective defined contribution (CDC) schemes will need clear and transparent governance frameworks, as well as effective communication strategies, to be a success, the Work and Pensions Committee (WPC) has been told.
The aviation sector's constant evaluation of mistakes to improve safety should be applied to defined benefit schemes, as too many are making the same mistakes again and again, latest research shows.
A month of strikes are due to hit 64 universities from tomorrow over major reforms to the Universities Superannuation Scheme (USS).