© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
November 24, 2013 1:27 am
Gaius Julius Caesar wanted to conquer the world. His contemporary and rival Marcus Tullius Cicero, the Roman senator, was less ambitious, merely wanting to go down as one of the best orators of his day.
Although the comparisons are crude and far from exact, Caesar and Cicero remind me of the two most powerful chief executives in the European fund management industry: Martin Gilbert of Aberdeen Asset Management (Caesar) and Michael Dobson of Schroders (Cicero).
The comparison is not a frivolous exercise, as it goes to the heart of their different strategies. Mr Gilbert wants to conquer the world, although through acquisition rather than invasion, while Mr Dobson is happy to grow his company more gradually and organically and would probably be happy, like Cicero, if he achieved the more modest goal of being remembered as one of the top people in his chosen profession.
To add piquancy to the comparison, Mr Gilbert and Mr Dobson are like chalk and cheese in almost every way. Mr Gilbert is short and street smart. Mr Dobson is tall and urbane. Mr Gilbert is a classic outsider, growing up in Asia and then Aberdeen, Scotland. Mr Dobson is a classic insider, educated at Eton and then Cambridge. Mr Gilbert is loud and unquestionably extravert. Mr Dobson is charming, but can be quiet and aloof.
But it is their difference over strategy – acquisitive growth versus organic growth – that is the most interesting from a business perspective. It is a debate that was thrust firmly into the spotlight last week by Mr Gilbert’s acquisition of Scottish Widows Investment Partnership, which catapulted his group past Schroders to become the biggest independent investment company in Europe.
So which strategy is best and what does it mean for the funds these two powerhouses run?
First, size matters. Mr Gilbert is right to recognise this. In buying Swip, he has boosted Aberdeen’s assets under management to £336bn ($543bn). This is important, as passing the $500bn threshold will grab the attention of the big US consulting groups, gatekeepers to the US institutional clients Aberdeen wants to attract in the next stage of its development.
Second, Aberdeen needs to diversify. Its business is too concentrated in its blockbuster products of global equities, emerging market equities and Asia equities. This purchase has immediately strengthened its business in its weak areas of fixed income and property. Most significantly, Aberdeen gets Swip’s solutions business, which advises customers on the UK high street. By buying Swip, its UK client base has jumped to 55 per cent of AUM from 27.5 per cent in one neat move.
But there are drawbacks. Acquisitions can create instability. It takes time to integrate a big business like Swip. Mr Gilbert estimates the integration will take two years. It is a period of uncertainty that could prompt some investors to withdraw money because of worries that the tricky business of matching IT systems and the inevitable job cuts will hit the group’s investment performance.
Schroders, in contrast, is a model of stability. With the exception of the acquisition of Cazenove Capital, Mr Dobson has largely concentrated on boosting Schroders’ distribution network by developing relationships with private banks around the world. This has helped the group grow organically and extended its reach globally. The big pension funds are more likely to go with Schroders because it is solid.
In terms of fund selection, it is therefore more of a gamble with Aberdeen, although only a foolish person would totally rule out Mr Gilbert’s chances of finally conquering the asset management world, even if he does have some way to go to reach the $4.1tn managed by BlackRock.
About one thing, however, I am certain. Mr Gilbert will not end up like Caesar. His loyal lieutenants, Andrew Laing (deputy chief executive), Bill Rattray (finance director) and Hugh Young (global head of equities) are unlikely to betray their boss. Unlike Brutus and Cassius, there will be no knives drawn in the boardroom.
David Oakley is the FT’s investment correspondent
Please don't cut articles from FT.com and redistribute by email or post to the web.
FTfm is the voice of the global fund management industry, providing must-have news and sharp analysis to the world’s top asset managers and professional investors.