During the last IMpower Fund Forum, Jean-François Hirschel, H-Ideas, moderated a roundtable with fund selectors and leaders of asset management companies about the role of culture in asset managers selection.
Informa Connect just published the main takeaways of this roundtable.
In the world of wealth and asset management, trust is paramount in any partnership. This is why brand-building is often a key talking point at IMpower | FundForum, and why it matters how you present yourself, your brand, and your organisational culture. In this article, Jean-Francois Hirschel, CEO, H-Ideas, shares his key takeaways and summarises the most important ideas shared at IMpower | FundForum 2024.
Culture: the deepest level of a firm’s identity
Why do fund selectors spend so much time trying to understand an organisation’s culture? Firstly, because it is so deeply embedded in the organisation that it defines many things as a consequence. For example, investment philosophy, stability, long-termism vs. short-termism, the balance between the interests of the client and the interests of the firm, etc. Above all, understanding the culture helps to build trust, the trust you need to allocate money over the long term, the trust you can have in the other information you get from the asset manager.
From an asset manager’s perspective, culture is fundamental for both external and internal reasons. Culture is what makes a firm truly unique, it is its DNA, what sets it apart from all others. It is a strategic issue that needs to be clearly articulated in order to stand out in a highly competitive market (there are 13,000 asset managers in the world). Internally, it is a way of aligning and motivating everyone around a common set of ambitions and a common purpose. It is also a way of recruiting the talents that the organisation needs and that will integrate smoothly. If the cultures are not aligned, it is unlikely that the collaboration will last.
Understanding a culture is like putting together a jigsaw puzzle
But how do fund selectors assess a culture? How do they ensure that it is not just a set of nice words on a PowerPoint presentation, but that it is really lived and breathed? At first glance, these are subjective concepts. Much harder to quantify than performance or headcount etc. There are two coexisting approaches to this challenge: talking to different people in the company and analysing what is behind some numbers. Of course you want to talk to the board and understand who owns the culture. But you also want to talk to the personal assistants or the person who greets you at the reception desk. They know the culture, they can tell you a lot about it. Then, in terms of numbers, it is interesting to look at the staff turnover statistics. Not the global number, that doesn’t tell you much. But at a more granular level, turnover by team, such as executive, investment, support, says something about the culture. For example, higher than usual turnover in a business development team is sometimes an early indicator that something is changing in the company. Compensation policy is another window into the culture.
Building culture: an ongoing endeavour
How do asset managers go about fostering a culture? It is much deeper and more demanding than putting up values posters in the cafeteria. It starts at the top. Probably more than any other issue, the Board and the Executive Committee need to lead by example. Then the culture needs to be put into context. How can the teams relate to the values, to the purpose? What does it mean in their day-to-day work? Carefully designed workshops that help to understand how the culture manifests itself in day-to-day activities have proved extremely effective. Every opportunity should be taken to express and discuss the culture; this is not a one-off project, but an ongoing endeavour.
An infinite number of shades of culture
We have tried to identify whether certain characteristics of a company translate into certain cultural patterns. Ownership structure can explain some behaviours: a company that has been family owned for generations, with the CEO and the company sharing the same name, will have different cultural patterns than a listed group, perhaps itself a subsidiary of a larger group. Size can also explain some behaviours. Otherwise, such characteristics as alternative vs. traditional, passive vs. active, don’t trigger any specific cultural behaviour. It is all case-by-case, and there is no other way for fund selectors to do the in-depth analysis on a case-by-case basis. This is the very definition of culture!
The growing importance of culture
The panellists were pleasantly surprised by the turnout at our presentation and the number of questions we received during and after the panel. In short, there is a lot of interest in this topic. We believe this is linked to two key words: trust and purpose. Because culture is about the deep identity of the company, it highlights what the company is about, what drives it, its fundamental motivations. Understanding this helps to foster long-term trust at all levels. In today’s world, having a job is about much more than a paycheck at the end of the month. Team members need to find meaning and purpose in what they do and align themselves with it. Again, this is what culture is all about. Finally, this may have been the only session at the conference where the words “artificial intelligence” were not uttered. Yes, culture is about people, and this is a key aspect of the asset management industry.
