What’s it like to manage billions of dollars?
The way I think about it is that as a team, we are trusted to manage billions of dollars of our client’s money. My job is to set the purpose and vision, find the right people, and clear away the barriers to allow our people to fulfil their potential and deliver on our aspiration. You let them do that, while making sure they work within a collaborative team environment.
You worked at two big corporates before AMP Capital. What did you learn?
I spent 17 years at Lendlease and learnt about leadership, management, culture and about great teams of people working on complex projects to deliver outstanding outcomes for clients.
In my six years at Macquarie, I learnt about excellence in terms of transactions in an investment banking sense that create value for clients. I learnt a lot about institutional investors through working with some of the leading pension and sovereign wealth funds in the world, helping them make real estate investments in Australia, many for the first time. They were investing for their members – this was their higher purpose – and I found that deeply motivating.
So, why did you join AMP Capital?
When the opportunity came to join AMP Capital, I saw that I could bring those two worlds together. The group was looking for renewed aspiration, a new vision and a cultural evolution and I came here to contribute to that, firstly in the real estate arm of AMP Capital and now for the whole business.
One of the benefits of being around for 170 years was that AMP had a great real estate portfolio, but it was underdeveloped. So, we started a A$5 billion development pipeline, helping create some of the best assets in Australia.
How do you think about the AMP Capital business?
We are in the trust business, and that is central to our purpose. We manage people’s money. You only get to do that if other people trust you. Trust is fundamental, particularly if people are handing over their capital on behalf of their constituents. They must have confidence that you are going to deliver so that’s been our focus and at the heart and core of what we do.
Then it is about aspiration. Five years ago, we started to think about what AMP Capital could be. We spent a lot of time trying to describe that aspiration and, ultimately, we wanted to be a pre-eminent global investment manager. That meant that in the eyes of leading investors around the world, and here in Australia, we were on their shortlist.
Originally, we had a whole bunch of caveats on that statement. But then we thought that if we had the courage of our convictions, we’d take those caveats away.
Trust is fundamental, particularly if people are handing over their capital on behalf of their constituents."
How do you put that vision into practice?
You need the right people in the room. A diverse team that buy in to the common purpose and vision. I inherited some great people and we have built on that. We have an outstanding leadership team and talented people in the overall business, who have come to AMP Capital to make a difference.
By delivering for our clients, our people want to do something that delivers both on the potential of the business and allows them to fulfil their own potential. People want that themselves. I don’t need to motivate them.
How does your style differ when dealing with clients?
With clients, I try to be very hands on and very present day-to-day right around the world. During the recent Royal Commission in Australia, I spent a huge amount of time with our clients, making sure I understood their perspectives and ensuring they were fully across what was happening in the industry.
And more recently during AMP’s sale of the life insurance business, I spent a lot of time with our clients and partners, particularly in China and Japan. We are a global growth story, and I regularly spend time on the ground across our offices worldwide.
I don’t take the responsibility of our vision and purpose lightly. I truly believe that we need to continually demonstrate that we can be trusted to deliver what we say we’re going to deliver, and partner with our clients globally to ensure they achieve their investment goals.
Has that style been successful?
We have been doing that for four to five years and now can point to things which are truly at the forefront. Our infrastructure capabilities in equity and debt markets are great examples.
Our real estate capability is another. We have attracted some of the best talent in that sector, and some of the world’s leading groups are now investing in our projects and in our assets. That only happens if those clients feel you are at the very top level.
Building on our well-respected fixed income and multi asset capabilities, we also thought there was an opportunity in equities, so we have built a number of strong teams over the last few years.
Initial performance and progress in this capability gives us confidence that we will be offering a client-centric capability in this space.
That change in tack must have involved some tough decisions.
When we decided we wanted to be globally pre-eminent, we had to hold ourselves to account on two fronts.
One, where can we grow? Where can we build things and be the best? That was in infrastructure, real estate, global equities, fixed income and multi-asset capabilities.
Two, what should we stop doing? So, we stopped doing things.
You need a diverse team that buy in to the common purpose and vision”
What did you stop doing?
We decided that in Asian equities we were not going to be at the forefront. So, we decided not to do that. In Australian equites, we decided our approach had to change. In 2017, we moved away from a fundamental Australian equities approach. We repositioned our Australian equities business to focus on areas where there is long-term demand and where AMP Capital will deliver active and cost-effective capabilities that match client needs. These capabilities include equity income, small caps and systematic. We attracted some outstanding people in these capabilities.
We’re continuing to build the team around this approach and the results to date are promising.
Where does growth come from in next five years?
What we have achieved is an indication of where we are going.
We have seen massive growth in our international business and that is part of the strategy of becoming a pre-eminent global investment manager. We now work with 325 international institutional investors. That number has grown by more than 25 per cent each year, for the past three years. We manage A$18.8 billion in assets on their behalf, a 10 per cent funds under management increase in the first six months of the year, and our infrastructure platform is driving much of this growth.
Internationally, our future will probably be institutional, because the retail investors sit behind the institutional investors.
AMP Capital is a true growth business for AMP. AMP has been clear in its commitment to support AMP Capital to continue our international growth ambitions, particularly in real assets.
Our real assets capability has been the growth engine. That will likely continue. We have grown external real assets under management by 20 per cent a year on average for the past five years.
You can see that our large closed-end funds in infrastructure debt, infrastructure equity and real estate are getting bigger and attracting great support.
Also, our global equities capability is a source of strong growth. The team have achieved strong performance over the last few years, and we’re seeing the momentum around this capability build especially as they hit their three-year performance milestones.
Importantly we are finding great investment opportunities in a competitive environment. That’s key. We must be able to find outstanding investment opportunities. Being differentiated in origination is important.
We are thinking about not only improving the assets we invest in and also improving the communities in which those assets operate, from environmental, social and governance perspective."
What is your competitive advantage in origination?
It’s having people who are leaders in their sectors, who can see the quality of and value in the investment opportunity. It’s the investment people, and for real assets, it’s also the asset management people.
Over the past five years, we have built up a deep understanding of how to manage and create value in assets in infrastructure, in particular. It means we can see the potential in an asset.
Nowadays, we can buy an asset and can be very competitive on price, because we see the potential to grow the asset aggressively to deliver great returns.
We expect to also see continued growth in real estate through our development pipelines. We also expect to see growth in public markets, where we continue to offer a differentiated proposition for our clients.
You have a number of international partnerships. How are they going?
Our strategic partner, China Life, is one of the largest listed life insurance companies in the world. We have two joint ventures with them, China Life Pension Company and China Life AMP Asset Management, which are growing unbelievably quickly. We see that continuing. That provides us with a foundation for broader growth within China.
We’ve been successful in the Japanese market where we manage A$6.35 billion on behalf of retail and institutional clients. MUFG: Trust Bank (Mitsubishi UFJ Trust and Banking) continue to support us with a focus on fixed income, infrastructure and real estate funds currently being distributed in the institutional market.
What about the PCCP partnership?
We bought a minority stake in PCCP, a real estate investment business at the end of 2017, and are co-owners with the founders, management and CalSTRS [California State Teachers’ Retirement System, the second largest pension fund in the world]. Their capabilities in real estate debt complements our traditional skill base in real estate equity. Their strong client base in North America, complements our traditional client base in Asia-Pacific and the North-West region. We can create value for our respective clients and are building a global investment capability. ESG is increasingly relevant to investing.
How do you balance financial returns against sustainability?
It’s not an ‘or’, it’s an ‘and’. Sustainability is important to AMP Capital and to me. Sustainability in business correlates nicely with sustainability in the ESG sense. AMP Capital was one of the first Australian-based investment managers to create a dedicated research team to assess the ESG factors that impact investments.
We’ve long taken an industry-leading role in advocating for best practice in this space. We have introduced ethical criteria for all our investments. We exclude tobacco, cluster munitions, landmines, biological and chemical weapons from our investable universe. We completed divesting these industries across our portfolio in 2018.
Doesn’t that mean you could take a hit in the short term?
Our client base is thinking about the longer-term. They want to see sustainable long-term returns. Making short-term only decisions is not where we focus. We invest for the long-term to ensure that our clients meet their constituents’ requirements.
We can’t be at the forefront unless we are thinking about not only improving the assets we invest in, but also improving the communities in which those assets operate, from environmental, social and governance perspectives. ESG is intrinsic to everything we do, and all our investment teams think that way.
When AMP Life is sold to Resolution Life, what will change in terms of how you manage those assets?
AMP Life is already a highly valued client. Delivering outstanding outcomes for AMP Life policy holders has always been fundamental to our responsibilities and this won’t change.
In regard to Resolution Life, we’ve had a long run into this, and we’ve had a great opportunity to engage with their team. The AMP Life team are our colleagues so we are working closely with them. We will keep doing that. The transaction with Resolution Life will further strengthen AMP’s balance sheet and provide strategic flexibility for a range of options including investment in support of the growth businesses as AMP focuses on its higher growth businesses in wealth management, investment management and banking.
How will AMP Capital contribute to AMP Wealth’s strategy?
Notwithstanding AMP Capital has its own focus and strategy, it remains an important part of the overall AMP business. AMP’s new strategy is to further create a client-led, simpler and growth-oriented business.
The strategy looks to reinvent wealth management in Australia, as well as tackle legacy issues. AMP Capital has a key role to play in supporting AMP in the development and implementation of this strategy.
Finally, what do you see for the future?
With the support of our clients AMP Capital has experienced strong performance over the past few years and set solid foundations for sustained growth. We are proud that we have established valuable and differentiated strengths in our investment teams, built and restructured capabilities where necessary and developed deep client relationships.
As we continue to build on what is working well, we will also continue to evolve our business.
First and foremost this is about understanding our clients’ strategies and helping them meet the goals of their members. We will also anticipate changes in our key markets and our strategy will enable growth through differentiated capabilities in real assets and public markets.
For our people it will continue to be about creating great opportunities for them to develop and be their best in making a difference for their clients. At the end of the day, that’s why we are here.