Kames Capital executives were in Malta last week to showcase the London- and Edinburgh-based investment management company’s expertise in global fixed income to local intermediaries.
Past performance shows whether managers have been able to deal with the vagaries of market volatility
William Dinning, head of investment strategy and economics, and John Parkin, business development consultant for retail, led a meeting for brokers at the Hotel Phoenicia on Tuesday, as they sought to foster business relations with firms over products most appropriate to the local investor community.
Kames Capital already has a non-exclusive representation agreement with Michael Grech Financial Investment Services and has three UCITS funds registered with the local regulator.
Mr Dinning, who is also involved in £12 billion (€14bn) in asset allocation overlays on UK pension funds, explained that Kames Capital was keen to bring its fixed income capabilities to the attention of Maltese investors.
The company also has a track record in UK equities and commercial property, and asset allocation. As at September 30, 2011, Kames Capital had £47 billion (€55bn) in assets under management.
A UK subsidiary of the Aegon NV group, it traces its origins to 1831 with the formation of the Scottish Equitable Life Assurance Society. A 40 per cent stake was sold to Aegon NV in 1994 and the company rebranded to Aegon Asset Management in 2001, two years after Aegon NV wholly acquired the company. It changed its name to Kames Capital last year.
Aegon NV is one of the world’s largest financial services groups with around 31,500 staff.
“Half of our assets under management are invested in global fixed income markets, both corporate credit and government bonds,” Mr Dinning told The Sunday Times.
“About a third of that is invested in global equity markets. The UK is an important part of our business but we also have direct investing strategies in North America, Japan and the rest of Asia. We have a property business, managing a number of property funds which are mostly UK-based but we have some funds that invest in Europe and Asia.”
Mr Parkin explained that four years ago, after building a strong franchise with its UK-domiciled range, Kames Capital sought to broaden its horizons with a suite of products appropriate for sale across Europe. Initial meetings in Malta showed there was potential cross over and interest, leading the company to register three funds here.
Kames Capital’s investment style revolved around a variety of factors, particularly the current position in the economic cycle, Mr Dinning said. Returns on equities had been disappointing over the past 12 years, while fixed income investments had experienced better fortunes.
“Government bonds have performed extremely well and, in the US dollar market, corporate credit has done really well over the past four years compared to equities,” Mr Dinning said. “During the downturn, corporate credit outperformed equities and has been outperforming equity in the recovery.
“If your focus has been government bonds, you must be pretty happy. That is probably true of many credit investors. We have to take a step back and think about where we are today, not just about where we have been. The way government bonds have outperformed equities over the past 30 years is a very interesting phenomenon.”
Many people had involuntarily become long-term investors who primarily wanted to see consistency and transparency in investment strategies, and past performance reports. Mr Dinning said past performance shows whether fund managers have been able to deal with the vagaries of market volatility.
If managers are able to show that they have been able to perform consistently well, then investors can conclude that they are flexible and not wedded to particular investing styles or markets.
He said the fixed income funds that Kames Capital seeks to interest Maltese investors in have been able to perform particularly well in different market conditions.
Mr Dinning, who joined Kames Capital in 2004, has previously held strategy roles with UBS Investment Bank in London and Merrill Lynch in New York following a 12-year career at Paine Webber in London, Hong Kong and New York. He makes regular appearances on Bloomberg TV and radio, and contributes to other media.
As part of Kames Capital’s investor communications strategy, which also involves its fund managers, Mr Dinning writes a widely distributed monthly update on market projections. The update features a summary of the company’s positioning across fixed income, equities and property.