Merging with Momentum

During the past 11 years, as CEO of Momentum Global Investment Management in the UK, Ferdi van Heerden has been involved in many mergers and acquisitions. Blue Chip speaks to Ferdi van Heerden about the company’s latest acquisition of Seneca Investment Managers Ltd.

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Ferdi van Heerden, CEO, Momentum Global Investment Management

What are the defining moments of your career?

Opportunities brought along by external approaches and internal group changes and a “career wanderlust” to take bold chances. These events were major catalysts in my career:

First was probably pre-university, after planning to do engineering, I ended up with a Sanlam actuarial scholarship.

Joining Momentum at the start of its growth phase back in 1991 was a key moment in my career. The reverse takeover of the business by Rand Merchant Bank formed great prospects. The creation of FirstRand and the acquisition of Southern Life and Sage brought choices and challenges. And an exciting position in Switzerland and the UK.

The key personal lesson for me is always leave on a good note, which I have been lucky to do and has opened doors again for me.

Please provide an overview of Momentum Global Investment Management (MGIM).

MGIM is an integral part of our broader Momentum Investments business in Momentum Metropolitan, but with a truly global investment outlook and capability set. MGIM was established in London in 1998 as the international investment management arm of Momentum Metropolitan Holdings Ltd. We manage a wide range of investment solutions for a global roster of retail and institutional investors (advisors and their clients from South Africa and the UK as well as global IFAs specifically advising expat clients.)

Over the past decade, we have expanded our range of solutions across several geographic markets, giving clients, large and small, the benefit of our outcome-based investing approach. We have had significant success in growing our client base by working in close partnership with financial advisors and wealth managers and we now have relationships in six continents. All this makes us well-positioned to be the “first port of call” for advisors when it comes to multi-asset solutions.

We manage multi-asset funds and model portfolios for our clients, and we have a senior investment team that has been together for more than 10 years.

More specifically, MGIM is:

  • A focused multi-asset specialist investment manager, with the same outcome-focused philosophy as our sister companies.
  • A superb, experienced and dedicated team with a well-established diversified, disciplined approach, and a great collegiate (“boutique”) can-do culture.
  • Our business is built on long-term relationships with advisors, wealth managers, Discretionary Fund Managers (DFMs) and trustees, including other investment and service providers. We aim to deliver risk-profiled portfolios with defined outcomes aiming to smooth the investment journey, and therefore, keep clients invested over the long term.
  • With us, investing is truly personal.

Please tell us about MGIM’s acquisition of Seneca Investment Managers Limited (SIML).

MGIM and our group invariably has an organic growth culture, but we have grown through well-executed acquisitions. We attained a range of model portfolios some years ago in the UK, and more recently we acquired SIML.

When we were approached to participate in the sale process of Seneca, the similarities between the businesses in terms of culture, values and multi-asset investing were immediately obvious, and SIML offered complementary skills to MGIM.

It has created a springboard for growth for the combined business in the UK retail marketplace with the additional benefits of a stronger offering and broader capability to deliver to clients.

Despite the fact that Covid-19 reared its head so shortly after initial negotiations, we believe the acquisition happened at exactly the right time, resulting in a combined £4.7-billion of assets under management and offices in both London and Liverpool.

The Momentum Multi-Asset Value Trust (MAVT) formed part of the acquisition. What is its investment objective and approach?

MAVT is an independent entity, listed on the LSE, with an independent board of trustees. MGIM (through the acquisition of Seneca) has the investment mandate and distribution responsibilities for the Trust. MAVT has a similar outcome-based philosophy to that of our multi-asset funds.

Its target is to deliver an annualised return of 6% plus inflation over a longer investment term of five to 10 years. While it is a challenging objective, it has been delivered over the past decade, and will continue to be our focus. Aligned with this objective, is a commitment to increase the dividend in line with UK inflation over the longer term and again this historically has been delivered. We define the investment approach as “refined value” across all asset classes.

The investment trust is unique because it:

  • is risk-profiled, to benefit advisor solutions;
  • has a discount control mechanism that enables liquidity; and
  • has substantial historical reserves from which dividends can be maintained even in tough times, without compromising on long-term strategic investment allocation.

SIML’s slant towards out-of-favour companies affected its performance during the pandemic in 2020 and after. Did this impact MGIM?

It is true that Seneca is/was more value-focused in its approach. As we all know, value was out of favour for a long time. However, it was clear to us that they did not follow a classic value style of investing, but more aligned to MGIM’s valuation-driven approach.

Value and the UK market saw a great bounce-back with the announcement of the first vaccines in October/November 2020. This resulted in the portfolios outperforming and the recovery has been spectacular.

The two core inhouse Seneca funds have recently been included in the FTAdviser Investment 100 Club which are the top five funds in the UK domestic market in each of the 20 investment association fund categories. Our funds were the leaders in their specific multi-asset groups.

The ex-Seneca investment team focus on finding unique ideas and investment opportunities and has a track record of delivering long-term value for their investors. These will be included in all MGIM portfolios where possible, as they give uniqueness to the funds. Music royalties, power of battery storage, etc come to mind as ideas.

Why is the deal a win/win transaction for both firms?

There are three audiences to consider:

  • Clients (IFAs and investors). We have a far stronger combined team and solutions range to support them in the UK. Our solutions in other markets have started to benefit from this.
  • Shareholders. An excellent outcome for Momentum Metropolitan with a good return on the investment foreseen and targeted, and for the Seneca sellers, a superb way to exit their shareholding to a firm that can provide growth for staff and clients.
  • Staff. There is a similar culture between MGIM and ex-Seneca in terms of ownership and accountability, as well as the passion of employees for the business.
    Please give an overview of the funds that were rebranded following the acquisition.

Five risk-profiled funds for the UK market make up the range:

  • VT Momentum Diversified Cautious, Moderate, Balanced, Growth funds, and the VT Momentum Diversified Income fund.
  • They target UK CPI+3%, 4%, 5% and 6% respectively over different suggested investment holding periods.
  • These are currently only available to UK investors, as they are not Section 65 approved in South Africa.
  • MAVT, with a similar investment (multi-asset) focus, should be available from stockbroking platforms in South Africa as it is LSE-listed.

Many of the underlying holdings will be held in the South African offshore funds of MGIM, being the Momentum Global Cautious, Global Managed and Global Growth Fund, all of which have been available to South African investors since their inception in 2008 (with a great investment track record).

MGIM offers a range of seven risk-profiled managed model portfolios to UK advisors and their clients, available on multiple UK domestic fund platforms.

With the expansion of the company is MGIM still able to place the client’s goals at the centre of the investment process?

Absolutely. Our shared outcome-based philosophy has most definitely prevailed and is very much hard-coded in to our investment process. This is the DNA of both MGIM and Seneca. If I have to say so, even more so than before, especially given our skill set and range of solutions for advisors in multiple jurisdictions.

The combined SIML and MGIM funds create a comprehensive offering for advisors and DFMs. What is this offering?

Our MAVT investment trust has gained significant traction with DFMs effectively recognising our different approach and wishing to boost diversification within their own client portfolios.

We have a range of inhouse-managed model portfolios for advisors and DFMs. We provide bespoke solutions where we partner with DFMs in all our markets (including SA, the UK and expat regions) as their investment engine.

MGIM has a range of single-asset-class funds that have been developed over the years to enable our multi-asset solutions and are now all in a UCIT vehicle and will soon be available in all our markets to advisors and DFMs. These will make excellent additions to DFM propositions and/or client portfolios across our markets.

Mostly, we are well-positioned and resourced to partner with more advisor firms and DFMs to help them construct investment offerings.

Where do you see MGIM expanding in the short term?

We will continue to focus on what we do best, which is our outcome-based multi-asset and single-asset solutions, working in partnership with and in support of advice-led investing. So, that means really focusing on enabling offshore investing for South Africans where they need this in their diversified portfolios, and for our multiple international advisors. And gaining far more traction in the UK domestic market and building on the recent acquisition of Seneca is key.

We will grow our investment consulting practice, and work with trustees of large pension schemes and charities.

What are the latest trends in this market that pertain to your business directly?

New ways of work have emerged over the past 18 months. Digital enablement and mobile execution are important, especially from an advisor and investor perspective. For MGIM, this means working closely with fund platforms to enable this. Climate focus and are also very important and we have recently launched a number of new funds following demand from our advisor network.

Closer to home, consolidation in distribution and end-to-end vertical integration. Is this the end of independent advice? As a firm, we drive advice-led investments; and work with and hope to enable investment propositions of advisors.

In multi-asset management, finding asset classes that are uncorrelated and can deliver a balanced outcome and a smoother journey. The traditional 60/40 portfolio split is not appropriate for the world of today, and hence we need to truly explore alternatives.

Analytics and the ability to source information globally across multiple data sources.