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RESEAR CH + RANKINGS


Glenmede’s bullish outlook


The ETF battle If grumblings and culture clashes were


Mergers and


acquisitions Not all MFOs remain, or want to remain, independent (see boxout on buyouts within the sector). There are mega-mergers (Stonehage and Fleming), as well as transactions where banks take majority stakes, inspired by investment banks, prompting them to buy into the wealth management sector in an effort to promote their balance sheets. The relationship does not always work


out. Almost as soon as the partners in her company GenSpring—who had $19 billion worth of clients at the time—sold their share to Atlanta-based bank SunTrust, chief executive Maria Elena “Mel” Lagomasino departed, after buying $1 billion worth of clients from GenSpring in the process. Lagomasino now runs WE Family Offices where she told RIABiz in 2013 that the “client remains very much in charge”. GenSpring is now run by 30- year SunTrust veteran Willem Hattink. WE Family Offices has $5 billion in assets under administration.


not difficult enough, loud voices such as Vanguard chief executive William McNabb have not made life any easier. McNabb, who is in charge of the world’s


biggest exchange traded fund (ETF) producer, has told investors the way to go is to abandon the traditional fund managers and buy passive funds, watch them outperform, and enjoy a heavier wallet as a result of cost savings. “Over the decade ended in 2015, 82%


of actively-managed stock funds and 81% of active bond funds have either underperformed their benchmarks or shut down,” McNabb said in the company’s annual report earlier this year. And investors have agreed—more than $1


trillion has poured into index-linked funds. The trend is expected to continue into this year and beyond. Deloitte, in its survey on key trends for investment management in 2017, said investment managers could continue to see their profitability challenged as clients continue to align both passive and active fund investments, “rather than replacing the latter with the former”. While Spudy agrees with the cost-


effectiveness of ETFs, he does not wholly agree with McNabb’s hypothesis. “There is no risk management that would


enable a manager to stabilise performance even in difficult market phases,” Spudy says. “Especially in unknown markets and


fields, active managers are largely more successful than ETFs and are preferred, despite their fees.” Hudson adds that ETFs are part of the


solution, rather than the problem. “The clients we serve require either a


discretionary or an advisory investment relationship and rarely take a self-directed approach based upon cost alone, so at this point we see ETFs as part of the solution rather than the entirety of it.”


20 CAMPDENFB.COM


For Gordon Fowler, the chief executive of Philadelphia-based Glenmede—which has $38 billion of assets under management— independence has its advantages. “It’s something our prospects and clients easily understand”, he says. “As a result, our growth and retention rates remain high. Our independence has also allowed us to continuously attract and retain high- quality professionals who prefer to work in an unconflicted and client-friendly environment.” Glenmede has existed since 1956 after starting out as a family fund for the Pew family, who founded Sun Oil (now Sunoco), and has remained independent throughout that, although it now serves 2,000 customers. But Fowler insists that the fact that it is not beholden to a bank or shareholder means that there is not institutional pressure to produce the sort of short-term earnings that can prove to be a pain for public companies. He adds that such pressure can “promote behaviour that is misaligned with client interests”. Fowler has the expertise when it comes to the pressures of working for a public company. For 22 years he worked for JP Morgan— most recently as the group’s global head of investment management.


ISSUE 72 SUPPLEMENT | 2017


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