American Century Investments, the Kansas City, US-headquartered mutual fund company with $86bn (€62bn) of assets under management, is pushing hard to draw European distributors’ attention. Yet it is eager not to be perceived as just another large American fund house wanting to make inroads into the old continent.
A rare exception amongst the top 20 asset managers in the United States for not distributing outside its domestic market, the firm only started pursuing its international expansion strategy in 2008, while the world was in the full grip of financial crisis.
“Our timing in Europe may be very good, as we have been hiring people, taking office space, outsourcing everything from legal and compliance to fund administration and there is more availability and everything is more affordable,” says Michael Green, head of the international business at the US company. “People are more open to reviewing strategies and are looking at new managers. However, our decision is not about market timing.”
Indeed, one of the distinct features of the firm is its ownership structure, which affects profoundly its culture, the kind of people that join the firm, the way money is managed and business plans are built, states Mr Green, who previously drove the international business strategy and execution at Morgan Stanley Investment management.
Medical background
Born as Twentieth Century Mutual Funds and renamed American Century Investments in 2000, the fund house is owned by the Stowers Institute Medical Foundation which was set up by the founder of the asset management firm itself, Jim Stowers, today a well-known philanthropist. Around 40 per cent of the asset management company’s profits support research to help find cures for genetically-based diseases, including cancer, which both Mr Stowers and his wife survived.
“As a firm, our primary purpose is the fiduciary responsibility to the investors that invest with us, but also we need a sustainable revenue stream that is devoted to curing cancer. We are building a very long-term business plan, we are not just that boom and bust type of firm,” says Mr Green.
In the US, the firm distributes mainly through intermediaries and institutions and regards itself as a full service provider of investment management solutions. It provides five investment disciplines – US growth equity, global and non-US Equity, US value equity, quantitative equity and fixed income – each with its own chief investment officer and investment professionals.
In Europe, the firm has singled out its particular growth style of equity investing as the forerunner of its distribution machine. Its philosophy of growth investing is centred on the belief that accelerating growth in revenues and earnings are more highly correlated to increasing stock prices than their absolute growth.
“Most people invest through a value approach, which is more widely understood. We think that we can be credible in growth equity investing, which is a smaller space than value equity investing. We are trying to narrow down the competitive space, although we’ll compete against the top 10 global managers, which have got more brand recognition than we do today,” acknowledges Mr Green.
responding to demand
Late last year the firm launched four Luxembourg-based growth equity Ucits III funds, for US and global audiences, in both standard and concentrated versions. Although Mr Green believes the space in which the firm will make its name will be in US investing, global equity funds were launched to meet significant demand in that area.
There will be more product launches in response to client demand but it is important to focus first and get some traction, he says. “I don’t think it is credible if we came to Europe and proposed tens of funds to people who had never heard of us. If you want to make an impact you have to be known for something,” he says.
Brand awareness, on the other hand, is not that crucial as the firm is looking to establish relationships with professional buyers, who tend to believe the discovery of boutiques, or investment companies that do not have a broad reach in the retail space, is the added value they bring to their clients. However, building up credibility in the “institutional buying mindset” takes time and effort.
“The strategies that we launched have a long track-record in the US. Professional buyers will look at the US for the track record, so brand does not really matter at this stage, it is all about how you manage money,” says Mr Green.
With only seven sales people based in London, there are obviously limits to the client support the team can offer. The focus is on institutions or intermediaries such as private banks, insurance companies, or major commercial banks and fund aggregators. “There are firms that don’t even want you to talk to their branches, and those are the people who suit us much better. What we hope to do with our small team in Europe is to focus on a relatively limited product set, and have a relatively limited focus on buying behaviour which leads into a relatively limited country set, so we have got a much bigger change of having some sort of impact that we can build on over the long-term,” he says.
