Aviva Investors' chief executive Euan Munro expects his new Gars-alike absolute return fund range can double the firm's profitability.
Munro also claims that Aviva has wider capabilities than his ex-employer Standard Life Investments.
His comments come as the firm unveils a three-strong absolute return range, starting with the multi-strategy target return fund which launches on Tuesday. The firm will later launch an income-focused fund, alongside an inflation strategy.
The range will be managed by Peter Fitzgerald and Dan James, overseen by Munro (pictured), who is a founder member of Standard Life Investments' (SLI) Gars team.Munro (pictured) said the strategy could double Aviva’s profitability.
‘The profitability of Aviva Investors historically has not been very high and if we can do £10-15 billion on this kind of proposition, that would double the profitability of Aviva Investors,’ he said.
Fitzgerald added: ‘If we get even £10, 20 or 30 billion in short order, it would be transformational as a business’.
In Munro's view, as the asset management industry becomes increasingly intermediated, he expects the newrange can do a good job of managing risk to specific outcomes.
‘What we are trying to do at Aviva investors is putting together substantial capability to deliver outcomes that are really important to our customer base,’
‘We would have to take quite significant risk in order to get that (income) from a fixed income portfolio. We think we can do better than that. We think we can give people an income with a highly diversified set of opportunities.’
SLI vs Aviva
There will be 20-30 ideas in the multi- strategy target return fund, which will target 5% over cash. Munro said this was the equivalent of the equity risk premium but could be achieved with the half the volatility.
‘In my previous incarnation I was running multi-asset portfolios at SLI and I do not think you should be surprised that the philosophy behind our approach is similar,’ Munro said.
But the architect of the Global Absolute return Strategy added that in his view SLI does not have as broad a capability as Aviva’s new range will have.
‘We have capabilities at Aviva that I would struggle to find almost anywhere, and certainly not where I was,’ he said, noting Aviva Investor’s capabilities in the mortgage- backed securities and convertibles markets.
‘I enjoyed my time at SLI but it simply wasn’t as broad,’ Munro explained. ‘SLI had a huge real estate business but did not have so much in liquid lending.’
He acknowledged that the fund has the same return target as Gars, but denied Aviva was trying to directly take on the £20 billion strategy.
‘There are lots of multi-asset funds out there, we are not just doing this to compete with SLI. We are competing with Schroders, BlackRock and everybody else.There are relatively few fund managers who will stand up and say this is what we are trying to do and we would invite you to measure the outcome. I think there is a big enough market place for us to come into.’
The chief executive acknowledged that the new propositions may need a track record of two to three years before some investors are prepared to take the plunge.