Newly appointed CEO Nils Bolmstrand tells Caroline Allen how he aims to sharpen and develop the role of Skandia Investment Group
Skandia Investment Group (SIG) under its new chief executive Nils Bolmstrand, is to develop its asset management expertise and profile, challenging rivals with long-established asset management units, while aiming to add value more visibly to the parent group.
Bolmstrand, 37, was previously chief executive of the fund group Skandia Fonder AB – the sixth largest fund group in Sweden. He took over SIG when former CEO Jamie Macleod left in September. Macleod formed SIG in 2007 as an interface between the highly regarded proprietary research teams at Skandia, and the global advisory community the firm serves.
But Swedish-born Bolmstrand wants to re-cast perceptions of the business. “We have the intellectual capital, and the profile of an asset manager. We are thinking how we can leverage our skill and knowledge and how we can be more nimble. You could say we have been hiding our light under a bushel. We will continue what we have been doing, but we want to make it more visible, more understandable to financial advisors and their clients.”
His tenure has been widely welcomed, after only a few months in post, by both the business and the industry. “He has the stamp of an academic, which probably comes from his research background,” says one fund manager. “But he has a consensual corporate style, which goes down well if you are trying to develop something in a very big organisation.”
SIG is the second fund management company Bolmstrand has led. He joined the unit as chief commercial director in 2008, in charge of product development, sales and marketing, and SIG’s open architecture activities. Previously, he headed Investment Research at the insurance group Skandia Link. A stint in Switzerland gave him international business development experience. From 2002-2003 he was at Skandia Finanz AG in Zürich, where the main client group was Swedish Expatriates, and while there he set up an internet-based private bank, successfully launched in 2002.
SIG now operates globally serving the needs of businesses across the Skandia Group and other third-party businesses and distributors. It has 200 fund group partners and investments in more than 2,000 funds, but no balance sheet of its own.
It comprises three units, or what Bolmstrand calls “infrastructures” through which investment products are distributed: UK-based Skandia Investment Management Ltd, Ireland-based Skandia Global funds and Skandia Fonder. Bolmstrand still holds directorships at Skandia Global Funds PLC Dublin, Ireland and Skandia Fonder AB.
Relationships
Untangling the relationships within the Skandia Group is a challenge for most outsiders. SIG is one of three main ‘Skandia’ businesses operating within the UK, all of which form part of the wealth management division of Old Mutual. SIG’s sister company Skandia UK operates its fund platform, life and pension business and sells through independent intermediaries.
Skandia International, meanwhile, specialises in offshore cross-border products and services for the entire group. It comprises Isle of Man-based Royal Skandia, Dublin-based Skandia Life Ireland and Old Mutual International, and is also responsible for Skandia Life sales to nationals in Finland. Royal Skandia has a range of tax-efficient investment products aimed mainly at expatriates and international investors.
Skandia Life Ireland was launched in 2003 to provide European advisers with Skandia life assurance products following the Insurance Mediation Directive (IMD). It has authorisations in a number of EU/EEA countries.
For its part, SIG manufactures and sells funds through both businesses, as well as Skandia and Old Mutual businesses worldwide.
The Skandia Group of businesses became part of Old Mutual plc four years ago. Originating in South Africa in 1845, Old Mutual plc is based in the UK but has a presence in over 40 countries. Old Mutual is listed on the London Stock Exchange and the JSE, among other exchanges. The group has £281bn funds under management and approximately 53,000 employees.
Bolmstrand starts his campaign for SIG with plenty of ammunition. The figures speak for the depth and reach SIG has already achieved. It manufactures and distributes multi manager and single strategy funds in more than 20 countries and oversees assets of some £53bn in a combination of proprietary, open architecture and guided architecture fund ranges.
Gross inflows in 2008 were £10.7bn, with between £100m and £140m per day transacting in retail funds and institutional mandates. It manages over 100 institutional segregated accounts of, on average, around £70m each. Its largest markets are the UK and Scandinavia.
Under the new strategy Bolmstrand hopes SIG’s internal contribution will be better measured, and its external profile in the market is better recognised. Five or six new funds are expected to be rolled out in the first quarter, taking what has worked in one market and replicating it in others.
The Nordic area is to be the first target, with the roll-out of a range of risk-targeted retail funds under a new “Skala” brand. These will adopt a similar approach pioneered in the UK with SIG’s highly successful Spectrum range.
Fully guaranteed products may also be transplanted from South Africa to the UK, although the precise nature of the guarantees, as opposed to the protection funds already available, has yet to be detailed.
While Skandia Group’s various businesses are focused either on wrappers or on platforms, as their proprietary investment manager SIG concentrates instead on investment solutions.
Bolmstrand wants to position the business at the point where advisors come to SIG for products to meet their client’s needs. The model is SIG’s highly successful Spectrum risk controlled fund range, launched in the UK in 2007, which is designed to closely match solutions to investor profiles and preferences.
Plugging in
The IFA concentrates on identifying needs and risk and then ‘plugs in’ one of the Spectrum funds rather than having to mix and match a range of self-selected funds. SIG’s research team does the work and selection of funds, while the portfolio managers blend them. Generally, IFAs have nothing close to that level of resource.
Bolmstrand also wants to extend SIG’s geographic reach. “We want to go wider than just the Skandia group in terms of distribution, and expand geographically building on our success in Hong Kong and Taiwan and into mainland China, probably distributing via banks. We are already on other platforms in the UK apart from Skandia, and we want to extend that. Hong Kong is motoring, we have good flows and traction there and we want to tailor funds for that market.”
He is a firm believer in SIG’s model which sources some of the world’s best fund managers to power SIG’s multi and single manager funds and it is this model which Bolmstrand believes is undervalued and needs a higher profile if SIG is to be regarding as a leading investment management business.
“We have over 40 skilled researchers and portfolio managers dedicated to choosing the right fund managers from anywhere around the world and then monitoring their progress against a fund’s objectives on a daily basis. Whether we are blending together managers in order to create a multi manager fund or looking for a manager to run a $100m single manager mandate, the process is the same – our role is to seek out excellence and offer it to our customers, often on an exclusive basis.
“We know no manager can be the best at everything. We also know we are the best at picking the best managers so I think we have the greatest chance of delivering performance if we do more of what we are very good at.
“The fact that we are identifying and bringing leading fund managers from around the world to our customers is something I find very exciting. The fact that it sets us apart from most other investment managers provides us with a competitive edge.
He believes the due diligence SIG undertakes is undervalued when those skills and resources are being channelled into supporting SIG’s own products, so it’s not surprising Bolmstrand has set taking a higher profile for what SIG does as a priority. SIG’s funds still have to compete with others on Skandia platforms and will still sell only through advisors, rather than direct to retail buyers.
The current fund stable comprises over 60 funds, including Ucits and non-Ucits, multi and single manager funds across the full range of asset classes. Since 2007, 10 funds have been launched, including the Spectrum risk-rated funds (£200 million assets under management), European Best Ideas (e200 AUM), Swedish Stars (SEK750 million AUM), the £70m Skandia Alternative Investments Fund and the £725m Global Dynamic Equity fund.
The level of assets under management offers benefits of scale, which exerts downward pressure on total expense ratios.
SIG funds aim to either exceed or be less costly than comparable single strategy funds in their sector, and if the funds meet expectations over the longer term, customers are generally prepared to pay a little more.
“People like the next new thing, the latest big idea. But we have to move away from asset management as a fad business where providers are just offering funds. Offering all round solutions means stickier money, it’s a more intelligent model. If there is any lesson from the last two years it is that you have to have transparency, and deliver the intended outcome.”
Underpinning all SIG’s proprietory products is a rigorous research process. A team of 45 analysts headed by James Millard, follows a “four P process” – philosophy, process, people and performance. SIG’s guided architecture ‘Core Fund Range’ comprises 275 ‘4P’-researched funds from over 100 fund groups, and SIG is also engaged by independent clients because the work is competitively priced against that of some consultants.
Bolmstrand says the business exists to serve financial intermediaries. “We want to make their lives simpler. They need to focus on their own clients. They are having to deal with more and more regulation and supervision. We are not pushing product at them. We are aiming to devise solutions that meet their client needs exactly.”
“We have a very big platform in the UK. We can see moment by moment what advisors want and what they are struggling with. They are finding it increasingly difficult to monitor the fund universe, which they have to do by law, and now all the platforms as well.”
Transparency
Everything SIG does must be supported by a clear and transparent process. “Whatever we offer, it has to do what it says on the tin. The end client may not want to know about the process, only that it delivers the required outcome. But it is very important that the advisor understands our process, and has complete confidence in it. Increasingly, they will value a rigorous risk management culture.”
New legislation, notably the Retail Distribution Review (RDR) is set to re-shape the financial advisory business. The major change will be adviser charging. When the new rules are implemented, charges will have to be incurred outside of the product being recommended. Currently, most unit trusts and Oeics include trail commission in their annual management charges.
Fund platforms are already the most important distribution channel for most fund groups and the value of platforms to those groups is likely to increase post-RDR because they will provide the mechanism for adviser charges to be administered, removing the burden for fund groups.
The way advisors are supported is also changing. Skandia UK is undertaking a programme of closing regional offices in the UK, but Bolmstrand says that has not affected perception or performance. “We were actually among the last fund platforms to close some offices, and only in order to provide a better service. You don’t need the physical presence on the street. It is all about service. We go to the advisors, rather than waiting for them to come to us.”
Despite a roller coaster year, he is positive about the industry. “We need to foster confidence, because without it the industry will die, and we have things to be positive about. We have not had a Madoff (embezzlement scandal) here. But sentiment has certainly been affected. We need to remember we are handling people’s hard earned money. Taking responsibility is part of being a leader in the investment management field.”
