Troubled investment firms must join the culture club

During an era when powerful political leaders are wrecking the existing global order — causing chaos in supply chains, trade relations and international markets — there are signs that the investment industry is finally coming to its senses.

Taking the temperature at the annual IMpower late June FundForum in Monaco is always an education. Over the years, trends for topics under discussion have moved from hedge funds, through emerging markets, embracing exchange traded funds and — for the best part of two decades — centring on sustainability.

Remarkably, looking at these prominent topics of the last 30 years, only ETFs are still on the agenda. Geopolitics and AI are currently the favourite megatrends of the subterranean Leaders Stage at the Grimaldi Forum. Another — somewhat less likely — realisation has recently joined these trendy topics. This is long-overdue recognition that leadership and human capital have become equally important to profits, processes and platforms.

Start-up hustlers

Holding court in the speakers’ quarter — Godfather-like, never having to move from his chair — was Martin Gilbert. Co-founder of Aberdeen Asset Management in 1983, long before it became Europe’s second largest asset manager in 2017 after the merger with Standard Life, Mr Gilbert is one of few remaining industry legends.

In Monaco, he dispensed brief words of advice, and encouragement, combined with trademark quips, to a long line of admirers, former colleagues and start-up hustlers, all waiting to pay tribute or seek funding.

Since 2019, he has distanced himself from traditional asset management business models, instead becoming more closely associated with the ‘neobanking’ strategy of Revolut, Europe’s most successful start-up, valued at up to $65bn, without any physical branches. As well as his chairmanship of Revolut, he has made inroads into the vibrant energy industry, currently at the heart of global politics, logistics and investment thematics.

Mr Gilbert has learned the hard way about the damage which excessive focus on a limited range of complex products can do to asset management firms. During the dark days of 2002, when many of his structured products lost 90 per cent of their value, his firm was described as the “unacceptable face of capitalism” in a parliamentary committee.

He soon realised there was nowhere to hide or run to. As a leader, “you have to be visible, internally and externally”, Mr Gilbert told me in Monaco, realising the responsibilities and central role of humanity and humility for effective leadership. “And it’s really hard. Honestly, it’s so tough because you just want to withdraw into yourself,” he said, hinting at the tough time suffered from critics in 2015 and beyond when billions were withdrawn and his stock plummeted.

Through this long period of self-doubt and mixed fortunes in mergers and product production, Mr Gilbert never doubted his instincts. His Asian expansion was always ahead of his time, and although his company structure could not always respond quickly enough, he would always hear the alarm bells sounding. 

Proceed with caution

Now he is warning those firms excessively selling private assets to the retail market that they should be similarly wary. Those obsessed with achieving top returns in increasingly commoditised assets should also proceed with caution.

Seasoned observers of the sector understand that leadership has become more crucial than ever. One of these is Amin Rajan, a finance professor and former UK government adviser, famed in the asset management world for his landmark studies, including advocacy for the “village of boutiques” concept, a new business model for investment firms in 2004.

In his latest CREATE-Research report, which Mr Rajan shared in one of Monte Carlo’s underground meeting rooms — with a coterie of CEOs from investment houses — leadership, culture and talent have finally taken centre stage.

These are now eclipsing the two other transformational trends in the industry — the rise of AI and the $100tn Great Wealth Transfer between generations. Engineers-turned-bankers working for Europe’s most prominent wealth managers agree that we have reached a pivotal, historical moment, where people have become more important than the platforms they construct, populate or utilise. We are living in an era geopolitically, technologically and socially, where the agency of Musk, Mittal or Ma appears to be triumphing over their processes and systems.

Even Gen AI, suggests ‘The Professor’, is no longer a purely tech play, it is a “people play too”, requiring a different style of leadership. Sticking to the old ways is no longer an option.

The asset and wealth management industry has always relied on its ultimate saviour of the markets, building up enough steam, assets and fees to mask the machinations of an often dysfunctional family.

But future structural headwinds will be too strong to be alleviated by volatile markets, likely to drift sideways in a low real return era, believes our Professor.

Brands on the run

Visionary leaders representing role models for the next generation must now be at the heart of the corporate brand. This requires a listening leadership, subjecting itself to the type of regular 360-degree appraisals demanded of most staff. The old school of Mr Gilbert & Co, conspicuous for their boats and bonuses, as well as bold business calls, may have enjoyed their last hurrah.

Among memorable speakers at the Monaco Forum was Jose Minaya, recently appointed head of investments and wealth at the Bank of New York. A proud son of Caribbean migrants to the US, Mr Minaya believes in a tech-led business model, embracing a broader set of investment strategies to most rivals, putting client interests ahead of corporate priorities.

As well as diversity of assets, cognitive, gender and ethnic diversity is key to the model, even if not currently favoured by the highly conservative core of the business and political establishment.

But at the very heart of Mr Minaya’s operating style, say those that have worked with him, is a deeper empathy for clients, employees and shareholders.

AI consultants respect him because he understands the human element of the tech revolution. Recruitment consultants love him because getting the best from new and existing talent is a crucial variable in his formula. And rival leaders fear him because they know his mentality is so distant from their own.

As Mr Minaya left the stage in Monte Carlo, one stunned competitor commented: “This will take some getting used to: soft skills are now the new hard skills.” Or as management guru Peter Drucker once remarked, management is just about doing things right, and you can get away with it. True leadership, on the other hand, involves actually “doing the right things”.

Yuri Bender is editor in chief of PWM