As an active long-term investor, we aim to create sustainable value for our clients in a way that also has a positive impact on wider society. We believe that building an inclusive organization will unlock the power of diversity, and by embracing difference, we will achieve better performance and more innovation. For us, striving for inclusion and diversity is not only the right thing to do; it’s the only thing to do.
While investors can approach 2021 with optimism that an effective Covid-19 vaccine will be available, the path of the economic recovery remains unclear. A broader toolkit of investments is needed – not just the regions, sectors and strategies that have recently done well.
We are pleased to introduce The Investment Intelligence Podcast, where experts discuss all things investing, from recent market developments, to strategy, sustainable investing, asset allocation, risk management and more.
The primary goal for most investors? A positive investment outcome that aligns with their objectives and evolves as needed over time. Looking ahead, disruption will change the market environment and returns may be more difficult to find. Investors may have to work their money harder to achieve the goals they seek.
Here’s how active asset management can add value against that backdrop.
The evolution of active asset management, more closely aligned to clients’ needs, supports one overriding goal: the industry needs to earn the trust of its clients and stakeholders. Active managers are in a unique position to be relevant in ways that help to underscore that trust.
This includes working with clients to understand the solution they need. Beating an index benchmark may be only part of that solution. Clients will increasingly require multiple tools and strategies to achieve their required investment outcomes – and the overall solution may evolve over time.
How do you define active management?
There’s more to active asset management than beating an index benchmark. Working with clients to understand their liabilities and build an appropriate solution is key, says CEO Andreas Utermann. A benchmark may play a part, but more often a broader set of tools and strategies is involved.
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Active managers also need to be bold and innovative on pricing.
At Allianz Global Investors, we have introduced a new approach to performance fees – one that is consistent with our confidence in the value that we bring. Our new “outperformance fee” offerings charge a low base fee, comparable to a passive product. Clients pay an active performance fee only when we deliver attractive outperformance.
Furthermore, any period of underperformance “accrues” within the fund and clients only pay a performance fee once this underperformance has been made good. This may be an incentive to buy into funds and strategies that have seen a recent dip in performance but hold the potential for improved future returns – thereby discouraging a procyclical approach, where investors tend to favour funds that have performed well most recently.
Stay focused on the opportunity
Now and in the future, investors can benefit from partnerships with managers who share in our clients’ journeys for the long run, adding value in a cost-efficient way – including through innovative fee structures – and staying focused on where the next big opportunities are coming from.
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