Incoming M&G CEO Andrea Rossi has put to bed any speculation that he will carve up the company by stating in his first media call that it was one option he “will not pursue”, reasoning the integrated model was “one of the main reasons” he took the role.
Rossi, who takes over from John Foley and will start the job on 10 October, stated to break up M&G was to “ignore a fundamental and unique advantage of One M&G.”
Three years ago the company demerged from UK insurer Prudential and investors and analysts hoped that this would allow for growth in the asset management and savings business. However, this has not come to fruition, with the share price falling 26.5% since November 2019.
Currently, M&G is comprised of a £370bn asset management business and a £211bn retail and savings arm. Prior to Rossi’s appointment there had been speculation that a new CEO would consider a further division of what some analysts considered an unwieldy business.
However, Rossi has made his position perfectly clear – the model works. He also believes the firm has “transformed” since its demerger with Prudential.
“Having a large asset owner and leading asset manager under one roof generates benefits for both,” he explained. “The asset manager receives a stable source of fee revenue from the asset owner and access to long-term patient seed capital to develop new investment strategies for all its clients.”
He went on to note the asset owner can use its “close proximity” to the manager to “secure difficult-to-access trading and investment opportunities”.
“This compelling combination enables M&G to innovate with our in house client to launch products that are truly market leading and available to all,” he commented. “Put simply, it is one of the main reasons why I was originally interested in the role.”
In its half year figures issued in August, the firm reported a profit fall of 44% as assets under management and administration fell £2.1bn despite a return to net inflows across its wholesale business for the first time in four years.
Rossi, however, said M&G had reached an “inflection point”, which was “clearly evidenced with a strong performance at half year”.
He also noted the weaknesses in the business, in particular the company’s heritage business of traditional with-profits funds and annuities.
“I know that M&G has not always lived up to their expectations. Rest assured, serving them better every day is a key priority for me,” the new CEO committed.
Streamlining and cultural shifts
Rossi was also clear that he understood concerns that M&G had a complicated business structure and he would be taking action.
“I want the firm to act faster, both in decision making and delivery execution,” he said. “And that means we need to be a far simpler organisation, in terms of how we deal with clients, our internal processes and our structure.”
He went on to note the strong foundations of the firm but stated it was at a “decisive moment” given the macroeconomic background and the pressure to be a responsible firm in terms of diversity and ESG.
Culture of the firm has been a growing subject of discussion and was reported as one of the major concerns for Schroders, which was considering a bid for M&G Investments.
In August, the Finanical Times reported several former M&G employees as describing an atmosphere of “animosity between the group’s fund managers and the senior management team, who mostly came from Prudential”.
While Rossi did not directly respond to these criticisms he did talk about wanting to improve the work atmosphere at the company.
“I want M&G to be the place where everyone wants to work,” Rossi commented. “That means investing in our people, processes and technology to build a client first culture. Like much of the industry M&G needs greater diversity, not just in gender and race but also in thought.”
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