Australia’s third largest asset manager AMP Capital has outlined some ambitious targets for the coming years.
The group – which employs some 5,400 employees globally – is looking to expand operations after announcing an increase of flows into fixed income strategies during 2015. According to the most recent annual report, the group is optimistic that partnerships with large fund groups globally – and in Asia specifically – will be key to its future success.
At the start of August, the investment group announced a new chairman would be replacing Brian Clark who retired after eight years with the firm and seven as chairman. The new chairman Vanessa Wallace is a career consultant of more than 30 years.
Wallace – who has been involved in a succession project with the previous chairman for months – will now take over an investment group with global operations and high hopes.
AMP Capital is a significant operation. It boasts offices in Bahrain, China, Hong Kong, India, Japan, Luxembourg, New Zealand, the UK, US and in its home country Australia. It also looks after more than £90 billion in client assets.
Then there are the activities outside of the main brand. It holds a 15% stake in China Life AMP Asset Management – a smaller, separate, brand for the Chinese retail and institutional market with around £9 billion in assets under management and growing.
For the trading team, the increasingly global nature of the business and the ambitious development targets has meant establishing a few new centres to cope with the internal demand.
In an interview with The Trade Asia, Joe Kassel, global head of dealing and exposure management at AMP Capital, explains: “We have a global growth trajectory. From a trading point of view, in the past three years, we have set up the Chicago office for trading the Americas and, in the past 12 months, a London operation to handle Europe.
“There is a strong logic in aligning where our trading capabilities are and where we want to grow. From a philosophical point of view, we strongly believe that we need to be in the markets in which we are investing.”
Kassel explains that his preference is for traders to be physically positioned in (or close to) the geographies in which investment decisions are being made.
He says: “We believe that our traders need to be… in close proximity to the investment teams in those markets. Our products are becoming more multi-asset in type and we have sought to align our trading structure and skillset. In London and Chicago, they are multi-asset traders.”
AMP Capital manages a mixture of diversified funds across all asset classes as well as single sector portfolios. For Kassel’s team, this means having the ability and skillsets to serve wide-ranging implementation requests serving equities and fixed income funds to more diverse, multi-asset and diversified growth strategies.
He says: “We are seeking a trading desk that reflects our investment aspirations and the needs of our clients. That comes back to the ‘up-tooling’ of our trading team. We are evolving from a theoretical multi-asset dealing team to this being the model of the future and we are resourcing that way accordingly.”
The move to a multi-asset approach is an organisation-wide one and not the sole target of the trading team. AMP Capital is investing in all asset classes from equities to infrastructure and is keen that traders and portfolio managers are able to use their own proprietary data to make more informed investment decisions.
Global dealing and exposure management activities both fall under Kassel’s remit. He believes operating a multi-asset model will make things much easier in the long term as the business continues to grow internationally.
He explains: “Bringing all the activities that are implementation into a single team has real benefits to our clients. In particular, the exposure management team rebalances diversified portfolios for cash flows, passive currency hedging for portfolios and puts synthetic trades on to equitise cash.”
Kassel says that the trading operation is much more integrated now with the investment activities of the business than in days gone by, with traders’ expertise valued a lot more by both the portfolio managers and the business as a whole.
He says: “In terms of the value add of the trading team, it is definitely a lot more than ‘point and shoot’ when an order finds its way to the trading desk. There are now many more connections to the strategies and lots more examples of two way feedback in terms of market insights.
“[For example] the role of liquidity experts is to feed back into better ways of setting positions and expressing a view in terms of whether it be exchange traded funds versus futures or pricing of swaps.”
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Like all market participants AMP Capital has adapted to a new liquidity environment with the migration of liquidity from the sell-side to the buy-side. Kassel says that understanding the new liquidity environment has been a steep learning curve for the business as a whole.
He explains: “The means of accessing the market has changed from worked orders to going straight to market electronically. Some of the limitations that came with that are better understood now.
“For example, when we were watching the UK’s EU Referendum votes being counted, we were being made aware by counterparties that certain algo orders would not be accepted for the time being. Risk pricing would not be guaranteed. These are the impacts of the migration of liquidity to agency style executions.”
Kassel says traders need to understand that regional, on-the-ground relationships, are still hugely important today as is having a thorough understanding of local market infrastructure.
He says: “We need to understand how broker Smart Order Routers are working and prioritise our order flow to reach different liquidity pools. Who are the other participants in those markets? Liquidity access is very much a local decision.”
With operations in so many different sites, ensuring compliance with numerous regulatory regimes is a challenge for AMP as a business. So, in order to comply with the various different jurisdictions in which its traders operate, the group has decided to embrace a global initiative which means operating to a single, highest possible, standard globally.
Kassel explains: “It is our mission to adhere to the highest benchmark globally, whatever it is. From a trading point of view, that means meeting our legal obligations. From a client viewpoint, it means providing transparency and the comfort that we are meeting our best execution obligations.
“That means adhering to a view of the world of the Financial conduct Authority and even though, in many regards, that is a higher benchmark than in our home market of Australia, we talk that language to our local customers.”
AMP Capital’s trading boss says the “conversation” about use of client commissions has “definitely landed” in Australia and this has greatly influenced the group’s thinking.
“We believe in transparency and in the proper usage of client commissions for purposes that are solely useful to them. The conversation in Australia has lagged other parts of the world, like in the UK. Our clients’ consultants want full transparency and disclosure.”