Few people know Capital Group. Even in the financial sector. That, despite being the largest independent and active asset manager in the world, with assets under management that exceed 2.3 trillion dollars. And despite managing some investment funds that manage more than 200,000 million dollars. Not only that, of its 40 investment strategies, there are 29 that are in the top 10% of returns compared to comparable funds.
How is it possible that a giant like this, which has shown a more than proven ability to earn money, has gone unnoticed in Europe? There are two explanations. The first, that despite already having 92 years of history, the firm has traditionally focused on its domestic market, the United States. The second, and more interesting, is that Capital Group has created a model designed to avoid star managers, to fight egos.
Guy Enriques is President for Capital Group clients in Europe and Asia. Two weeks ago, the firm organized an event in London to publicize the manager’s expansion plans, which want to have a greater presence outside its natural market. “Us we are the antithesis of firms that promote star managers. We don’t believe in this kind of individualism,” he explained.
Now, what can be done to placate the ego of a manager who manages a fund of billions of euros and who has managed to earn a lot of money from his clients?
collective wisdom
- Multi-management. From the firm they defend that the best method to achieve good returns is to give freedom to each of the managers and add all their positions in a single vehicle. The market will be in charge of passing judgment and defining which strategies are going well and which ones are not. They also reject seeking consensus between different managers, or for a global investment management to define the guidelines.
- Coordination. Only in some funds in which there could theoretically be a bullish position on a bond as opposed to a bearish one on the same asset, would an investment coordinator figure come into play. This role may end up imposing or limiting certain decisions to ensure that the fund’s portfolio is faithful to the prospectus committed to the end customer.
The first recipe is remuneration scheme. A good part of the compensation that managers receive is variable, but not for what they have earned in one year, but for the returns obtained in three, five and eight years. Especially eight years old. For an employee to receive a succulent bonus, he has to demonstrate an excellent return, but not by hitting the asset or the fashionable company one year, but with sustained profitability over time. This means that the managers do not make short-term decisions and that they normally work for the firm for many years.
The second factor is how to organize the management of funds. Instead of having one or two managers, as happens in most firms, at Capital Group they let the same product have eight or 10 managers. Each one of them administers a part of the fund using the strategy that it deems appropriate, within the theme of the fund.
Even the analysts, who are mainly dedicated to delving into the accounts of the companies, have a small proportion of the fund in which they can invest.
Hamish Forsyth, president for Europe and Asia, pointed out in this same forum that at Capital Group “we don’t have a global brain, a single vision, but the ideas of each of our managers and analysts are what shape the portfolios. From bottom to top”.
This obsession with avoiding the spotlight has meant that Capital Group directors and fund managers rarely give interviewseven if they are the oldest.
Another important factor has to do with the firm property. Unlike BlackRock, which is a publicly traded business or Fidelity that is controlled by a family, here the owners of Capital Group are the employees. There are 450 partners who control the manager. But the taste for discretion goes so far that when a manager is offered to become a partner, it is not made public. Not even if he wants can he advertise it on his business cards or on his office door.
Anti-ego paranoia reaches the point where employees often address each other only by their initials. Thus, Guy Enriques signs his letters as GMQH. And Hamish Forsyth is AHF.
With the large size it accumulates, it is not uncommon to find Capital Group as one of the largest shareholders of Spanish listed companies.
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