Face to Face

March 23, 2014 7:43 am

T Rowe Price: Replacing the ‘rainmaker extraordinaire’

Robert Higginbotham©Tony Healy

Robert Higginbotham faced the unenviable task of replacing one of the fund industry’s most flamboyant personalities when he joined T Rowe Price two years ago.

His predecessor, Todd Ruppert, T Rowe’s charismatic former chief executive of global investment services, is a well-known industry figure who spent 27 years at the US fund house.

Mr Higginbotham, however, says he was not fazed by having such big shoes to fill: “Todd will be the first person to say that he and I are quite different people. He is larger than life and a rainmaker extraordinaire, and I am probably more of a business manager and strategic planner.”

The 46-year-old joined T Rowe as head of global investment services in 2012 after his surprise departure in 2011 from rival US fund house Fidelity, where he was chief executive of its European business.

He took a year-long career break between the two jobs, which was largely spent at home with his family, rediscovering a love of cooking and training for a marathon.

Much of this period was also dedicated to the intense job application process at T Rowe, which called him in for 34 interviews in just four months.

The Baltimore-based fund house, which currently manages just under $700bn of assets, decided to bring the self-described strategic thinker on board to help the company focus on the next stage of its international development following Mr Ruppert’s retirement.

Its international business is clearly in need of some attention. Although the US fund house enjoyed record asset growth in 2013, securing $10bn of inflows from US mutual fund investors, investors also pulled $22bn from its non-US mutual funds.

James Kennedy, the group’s chief executive, blamed these “uncharacteristic net outflows” on withdrawals from big institutional clients outside the US.

Mr Higginbotham is hopeful that he can regain the international momentum enjoyed by the company between 2000 and 2007, when assets under management from non-US investors grew from zero to $90bn.

The investment services head spent his first year at T Rowe devising a strategy, which won board approval last September, to push into new institutional markets, including Korea, Hong Kong and Singapore in Asia, as well as Italy, Germany and Chile.

The company, which is celebrating its 77th birthday this year, also wants to focus on intermediary investors in the important markets of Australia, Japan, the UK and the Nordic countries.

Mr Higginbotham says he is now ready to put that plan into action, but he will not measure its progress in terms of asset growth. “The biggest thing I feel I will be judged on in the next two years is whether I can attract and retain really good people,” he says.

Staff retention was recently highlighted as a significant issue for the fund house in a report by Morningstar. It described 2013 as a “tumultuous year” following the unexpected departures of two high-profile managers and five equity analysts from the company.

The data provider said the managerial changes were “unusual” at a fund group known for its organisational stability, and raised questions over whether it has become “too big and bureaucratic”.

Mr Higginbotham believes that he can hire people who will stick around for the long term, given the appeal of the company’s focus on clients, which he says “pervades pretty much everything T Rowe does”.

Client focus has become an almost hackneyed expression in fund management, and investors would be hard pushed to find an asset manager that did not say client-centricity was one of its primary objectives.

But Mr Higginbotham is convinced that T Rowe is genuinely ahead of its peers on this front. “I think most firms that say [they are client focused] will believe it, but it depends on the extent to which they can [provide] evidence and truly execute it,” he says.

He believes the proof of T Rowe’s client dedication lies in the fact that the company refuses to negotiate fee deals for big clients, and has seen investors walk away as a result.

“The vast majority of asset managers do deals for different clients, but T Rowe just won’t do it. It is not because we are arrogant, we just believe that every client should pay the same price for what they get.”

He adds that T Rowe routinely closes funds with fast-growing asset bases to new investors sooner than is typical in the industry.

“There is absolutely a trade-off between the volume of assets you raise and how well your portfolio managers can do their job,” he says. “Every strategy in the world has this tipping point where [asset growth] is good for the firm because it gets more revenues, but worse for the client. That is an issue I think every asset manager has to be incredibly focused on.”

But Mr Higginbotham admits he is at times a little frustrated by T Rowe’s slow pace of change.

The company, for example, is still “doing its homework” on whether it wants to develop actively managed exchange traded funds, despite filing a proposal for such a product with the US regulator last September.

It has also taken nearly 12 months for Mr Higginbotham to get his first big hire signed off since he joined the company.

“That is the way T Rowe tends to do things. I learnt that in my first 18 months here – it really will not rush, and by nature I tend to like to get on with things,” he says.

But the cycling enthusiast says he has adapted to the company’s “cadence” – a term used to describe the ideal rhythm for a long-distance cyclist.

“The thing I have learnt at T Rowe more than anything is getting the cadence in the organisation right – driving the bike hard enough that you feel a bit of bite, but in a way you feel you could do 200 miles. That for me is an analogy that works exactly with the asset management industry, which has to be a patient business,” he says.

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Curriculum vitae

Robert Higginbotham

Born September 10 1967

Education

1989 BA (Hons) Geography, Sheffield University

1990 Master’s in business, Imperial College London

Career

1990 Graduate trainee in marketing, Prudential

1991 Investments product manager, Prudential

1998 Business development director, Prudential

1999 Pan-European marketing director, Schroders

2004 Global head of marketing, Schroders

2005 Global head of product, Schroders

2007 President, Emea, Latin American and India retail, Fidelity International

2010 Chief executive, Emea and Latin America, Fidelity

2012 Head of global investment services, T Rowe Price

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T Rowe Price

Founded 1937

Headquarters Baltimore, Maryland

Assets under management $692.4bn

Employees 5,668

Ownership Nasdaq-listed company

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