You've said that 2010 is “a year of change” at Robeco, can you explain? We've set a five-year plan for 2010-2014. ... We first select, cut and then grow (product offerings), and in that order. The second part of the strategy is to focus on mainstream strategies and niche products in which we've been successful, and to continue to feed and grow them. ... We've identified five growth areas in which we will leverage existing capabilities.
What areas? To begin with, there's responsible investing. At the moment, we own SAM (Group Holdings AG), a company in sustainable investments based in Zurich, but we've also added sustainability as a standard issue on all the products we have on offer. ... We will not charge extra for this service; it's part of our DNA. The second part I would like to stress is an ambition to serve clients more holistically. We've set up a department called investment solutions. We would advise the client with a product suite, with research and advice, and with multimanager capability.
It sounds like fiduciary management, is it? It looks like fiduciary management, but where fiduciary management typically concentrates on assets, we will specifically take into account the client's ambitions and liabilities.
One example could be the pension fund of our parent company (Rabobank Pensioenfonds). We advised them to restructure an equity mandate we were managing that didn't perform very well in 2009. We changed their enhanced indexing mandate to a low-volatility global equities (strategy). Also, part of the mandate is now outsourced (to AQR Capital Management and PanAgora Asset Management) because we felt that there were external managers with the skill sets that we couldn't offer. At the end of the day, they followed our advice and they're happy with it, and we were able to charge a higher fee although we run less money for them. ... The margin on the (assets under management) we lost was low, and the margin on the (assets) we gained is high. The asset management business model is evolving from “product push” to “advisory led.”
What are some other investment capabilities being developed? One of the things we haven't mentioned is our ambition to team up with our parent company (Rabobank Groep NV). For example, we're building our own offering in food and agribusiness (investment strategies). ... Our parent company has stated that they want to be the world's No. 1 bank in food and agribusiness. We can leverage from Rabobank's research, networks and position in the market. We plan to offer a lineup of about 10 funds investing in the food and agribusiness theme. Another important area for us involves inflation solutions. If you look at current markets, the debate is on deflation. So this is not something for tomorrow or even the day after tomorrow ... but we think there are serious risks that inflation will rise, maybe not this year or next year, but 2012 and beyond.
What's the fifth area targeted for growth at Robeco? We'd also like to make better use of our quant capabilities. An example of this would be what we call conservative intrinsic value investing. There, the idea is that we try and deliver equity risk premium in such a way that we do not invest in the benchmark but into lower-volatility companies. We can offer this (strategy) at an attractive price because it's a quant model, so there are not some 20 portfolio managers behind it to run it. We think it's an attractive alternative to an (exchange-traded fund). You can also run a similar strategy in other asset classes, for example, in government bonds. ... It's a combination of our skill set combined with smarter investing. If you do that at a low cost, we think we have a better answer for passive investing.
Some of the strategies you've mentioned — sustainable investing, agribusiness and inflation protection — are similar to the investment ideas you also espoused while at APG, money manager for ABP. In a sense, do you see your current role as a continuation of your previous role? On a personal level, the roles are very different ... from serving a few large pension funds in the Netherlands to serving a variety of clients — not just institutions but also retail and wholesale — on a worldwide level ... What's similar is that my job has two major aspects: one is about investing and the other is about people. It's a bit different now than in my previous job, but still, it's about people — motivating them, giving them room to maneuver, pushing them a bit and sometimes restraining them. That's still the part about my job which I fully love. It's a nice combination of old and new for me.
Do you have a target in mind for Robeco's institutional business? We now have a 50-50 split (between retail and institutional), and while we want to grow both sides, we expect the institutional part will grow faster. We're aiming for a 40-60 split by 2014 with 60% to institutional ... We've set ourselves an organic (growth) strategy to remain a midsize asset manager. But if we were to see something that fits into our (long-term) strategy, we're more than willing to take a look at it. If needed, we can pay cash (for acquisitions), which not too many asset managers can say.
Are you considering an acquisition? We're not looking to acquire, but there's a great number of people out there looking to sell. Given our current financial strength, we have been shown a number of opportunities, which we might consider.
From a geographic point of view, where do you see growth potential for Robeco? We expect to grow fastest in Asia. We're teaming up with the Agricultural Bank of China. We're looking at a joint venture to be an asset manager of choice for the Agricultural Bank of China. The (memorandum of understanding) has already been signed, and we're looking into the opportunities available. We have a joint venture in India with Canara Bank, the fourth-largest bank in India, which started three years ago from a very small base of offering money market funds to the local market. We then added fixed-income products and, after that, equities. We now have a 70-strong team, and we just signed the first international client (investing) in Indian equity.