Cumming’s exit from Aviva shows demise of fund management star culture

“I don’t see myself as a star fund manager,” Richard Buxton told the Financial Times in 2014, which is of course exactly what you’d expect a star fund manager with any sense at all to say in an interview.

It was a year after the then-head of UK equity at Schroders quit the UK’s biggest fund manager to move to Old Mutual, a year in which the fund he ran had grown from £160m to £1.1bn, boosted in part by money from his old shop.

Three years later, and another heavyweight made a shock move: David Cumming left Standard Life after 18 years, a departure dubbed a “big loss” for an investment house in the throes of merging with rival Aberdeen Asset Management.

Cumming’s “mutually agreed” departure this week from Aviva Investors, where he was chief investment officer for equities, prompted headlines but less business-related angst. The unit is a sufficiently small part of Aviva’s overall business not to trouble the insurer’s investors.

But being a celestial body of the fund management universe also ain’t what it used to be. Gone are the days when the big names that drew big money ruminated about which boards or bosses didn’t cut it and took action accordingly.

The Cumming exit isn’t a case of a fallen star (and in any case, it’s hard even to register against Neil Woodford in that particular category). The fund that Cumming managed was up 62 per cent over the past year, according to Morningstar Direct, against a category average of 24 per cent.

The official explanation is that Aviva is building “a market-leading sustainable outcomes franchise”. What this seems to mean is going all-in on ESG and focusing on where it thinks it can win business — which still includes UK and global equities despite shedding more than a third of its equities team. About 10-12 people are thought to be leaving, in the US and France as well as the UK.

This feels like a dose of good old-fashioned cost cutting. Stars don’t come cheap. And nor does competing for external funds: about 80 per cent of Aviva Investors’ £370bn under management comes from the insurer itself. Aviva, the group, is under pressure to cut costs, not least from activist investor Cevian. It’s hard to see how the cull doesn’t weaken the effort to win third-party money.

Big names, perhaps, are no longer considered essential. Fund management has been increasingly depersonalised and institutionalised. Key person risk and tricky internal politics was probably enough for companies to favour a different approach. 

But industry change has done the rest: the rise of cheap, manager-agnostic passive investing has squeezed active managers’ heft (if not their UK fees, which have been remarkably resilient). Portfolio construction guys and risk management whizzes get top billing. Even boutiques now tend to emphasise their process rather than their people, says David McCann at Numis.

What’s perplexing about Aviva’s emphasis on ESG here is that Cumming has long spoken up on governance issue such as executive pay; he recently bashed Deliveroo over workers’ rights and its dual-class share structure

This is another area where active managers generally have lost some clout, with decisions outsourced to proxy firms such as ISS and the growing influence of centralised governance or stewardship teams. But Aviva has argued that partnership between stock pickers and stewardship is a particularly effective one.

Engine No 1, the titchy hedge fund with an even-titchier stake in Exxon, has this year shown that size doesn’t have to equate to impact in the world of sustainability. And an industry that has got religion on stakeholder concerns at the same time as going cold on personal branding or visibility may miss a trick. 

ESG investing can’t all be about marketing, screening, standards and data (not least because the latter isn’t currently very good). At some point, it has to be about standing up and shouting when something stinks. Without that, it risks making less of a difference — and being considerably less interesting to boot.


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