Efficiency drive heralds a new era for Robeco

Roderick Munsters, the driving figure behind the modernisation process of two of the world’s most sophisticated pension funds in the Netherlands, took over as the CEO at Robeco Investment Management in September 2009, determined to leverage its two decades of experience in money management, on the client side, to steer the Dutch asset management towards a new era.

“Our strategy is to be more focused, and try and achieve better results for clients with fewer products. The mantra we use is ‘select, execute and then grow’,” says Mr Munsters.

The plan is to spend more time and make efforts in those areas where the company already excels, and can meet client demand with better solutions and client service. “Instead of shooting for the moon, we aim at a target which we have the highest chance of reaching,” he says.

Selecting or making choices has meant shutting down operations and merging and consolidating funds to reduce costs. Started already in 2008 under Mr Munsters’ predecessor George Möller, the cost-cutting exercise has so far produced a 30 per cent reduction of the Rotterdam investment funds to 230, the shutting down of offices in different countries and a headcount reduction by 250.

“We want to be successful in the countries where we operate and if our presence is too small, if the market is not moving fast enough, or if we do not have a convincing product line vis a vis our competitors, we’d rather pull out. I like growth but it needs to be managed,” says Mr Munsters.

Organic growth

His ambitious goal is to grow the business organically to reach €250bn of assets by 2014 from the current €147bn. And he also wants to further reduce costs – after the company made a loss in 2009 due to a decrease in fee revenues – and improve profitability.

Funds were shut down or merged, simply because there were no enough assets in them, he claims. “In the past, there has been too much emphasis on assets under management and not so much on margins, and we are focusing more there.” Costs were reduced by €20m last year and the plan is to reduce them by a further €35m by 2014. “We saw a strong improvement in profitability in 2010,” he says.

One of Robeco’s issues was that it was too much a “middle of the road asset manager”, as it was not differentiating itself from the competition, he believes. In addition to a range of plain vanilla, mainstream products, such as global equities and fixed income, and niche products – such as managed futures managed by the subsidiary Transtrend – the plan is to add five strategies where the firm can bring a credible story.

Responsible investing is one of them. After the acquisition of Swiss-based Sam group, Robeco has greatly increased its weight in the sustainability space. Its aim is to integrate responsible investing perspective in all portfolio management activities and processes, leveraging Sam’s knowledge and research. This is going to generate added value for clients, believes Mr Munsters. “We did not ask our portfolio managers to change their process, this is not just about being the greenest possible asset manager but it is about recognising opportunities, and avoiding risks.”

Around 50 per cent of the assets managed at headquarters in Rotterdam are now run in a sustainable way, but this process, which started in 2009, was not implemented without some hiccups. Due to a conflict of strategy, Sam’s chief executive Sander van Eijkern, who had been at the helm of the Swiss-based unit for a just over a year, resigned. His idea of continuing to run Sam as a boutique on its own clashed with Robeco’s ambitions, explains Mr Munsters. Moreover, Sam is benefiting from being part of a bigger organisation, of Robeco’s risk management and audit experience, as well as its global distribution network.

Another area where Mr Munsters has high expectations for growth is in the investment solutions space. This newly created team of 30 people is going to offer solutions to clients, rather than products, and will leverage on the expertise of its Zurich based multi-management firm Corestone to put together portfolio solutions using both Robeco’s and third-party products.

Mr Munsters also wants to leverage the knowledge and expertise in food and agri business of privately owned, AAA-rated parent company Rabobank, to develop its new product thematic offering, ranging from sustainable forestry products, to food and agri credit portfolios, and soft commodities. The growth of the world population and increasing welfare in Asia are leading to different eating habits, which result in the need for more food product, soil, fertiliser, and high demand for capital, such as land, he says.

Another key area of focus is the quantitative investing space, where the firm currenty manages around €7bn in assets. A product range offering a hedge against inflation is also in the pipeline.

“We do expect there a chance of inflation returning to the market place and we think it is worthwhile to be ready,” he says. “Running a business is also running a risk. If we prepare for it, and this happens, we will benefit from it as early movers.”

Dateline

September 2009 Roderick Munsters took over as Robeco’s CEO

2005 – 2009 Member of the board and chief investment officer of APG All Pensions Group.

1997 – 2005 Member of the main board (Investments) of PGGM

1989 – 1997 Range of positions at NV Interpolis, including portfolio manager

Since 2005 Member of the Capital Market Committee of the Dutch Authority for the Financial Markets (AFM)

2006 – 2009 Chairman of Eumedion, the Dutch corporate-governance forum

Graduated from the University of Tilburg in 1988 in Business Economics (Corporate Finance) and in Financial Economics in 1992.

Growth from across the globe

Like many of today’s international asset managers, Robeco is looking at the Far East to develop its business. The memorandum of understanding that Robeco’s parent company, Rabobank, signed with Agriculture Bank of China, may open up opportunities to offer asset management products to the Chinese bank.

The firm’s joint venture in India with Canara Bank, the country’s fourth largest bank, which started three years ago by offering money market funds to the local market, has expanded to include fixed income and equities and grown to a team of 70. “We are now servicing our first international client in the Indian equity market,” says Mr Munsters. The firm’s small operation in Singapore was recently closed down, and Robeco will look further afar to its regional hub of Hong Kong.

As part of Mr Munsters’ more focused strategy, offices have been also shut down in Italy, Austria, Portugal, Belgium, and in the Nordic countries, with assets in these markets now overseen from Rotterdam. The firm’s plan is to be more focused on key accounts, such as HSBC, with which Robeco has a global distribution agreement with the private bank. Currently 20 per cent of Robeco’s assets are distributed through Rabobank, and the rest, split 50/50 between institutional and retail, is sourced from third-parties, although the institutional part will grow faster, expects Mr Munsters.

Roderick Munsters, Robeco