Ninety One executives watched the liability-driven investment situation in the U.K. unfold with no strings attached.
The firm never entered the LDI business, even though "it was very exciting because it was huge volumes," said Hendrik du Toit, London-based CEO at the money management firm.
Ninety One's executive committee discussed the LDI situation at an October meeting, where Mr. du Toit recalled that the firm had decided in the mid-2000s not to participate. The firm had agreed that the risk of things going wrong "if the world goes unstable" was not really worth the 10-basis-point fee.
The fallout is that clients are "going to be very upset, and lawsuits are going to be quick to come. And we will see many lawsuits, many claims coming out of this for years to come," he said.
So, while deciding not to enter the LDI market meant the firm "missed a massive growth opportunity — we could have been five or 10 times our size — actually we're delighted today that we are dealing with risks that (we) understand," Mr. du Toit said. Those risks are, quite simply, whether the firm can perform for clients, serve them properly and remain stable.
One area that Mr. du Toit thinks will be popular looking forward is liquid assets.
"We are also going to come into a world where people will appreciate liquidity again. Everyone has been going illiquid. I mean, it's insanity what's going on in markets now where people say 'my private markets have done so well.' Actually, you haven't repriced them — just wake up. Public markets should be the cornerstone of pricing," Mr. du Toit said.
What's happened is that public markets managers have "taken this hit with the volatility upfront — we are in the real world. But the interrelationship between public and private markets … should be healthy," he added.
He also doesn't think a rebound in markets is yet imminent. "I don't see a quick recovery in this market because we haven't seen big credit accidents yet. We still need to see big accidents in credit markets, we need to see the runnings on institutions that can't meet their liquidity, before we get out of this. We are going there, so you better make sure your businesses … (and your) portfolios are clean, because we're going to see one or two unexpected surprises," Mr. du Toit said.
