July-August 2010


Gary_WithersFirst State Investments’ new CEO Gary Withers plans to expand presence in Europe Angele Spiteri Paris hears also about the First State's plan to recruit a fixed income manager. The new CEO of First State Investments, Gary Withers, is on the hunt for firms to acquire that will help expand the company’s investment capabilities and its footprint in Europe. Ensconced at First State for a little over six months now, Withers’ plans for the firm - which runs £81.5bn (€97.6bn) of assets -  include buying other managers.

“We’re looking to grow the business and  that includes looking seriously at acquisitions,” says Withers. But he stresses any acquisition will be carefully considered.

Window shopping
Withers says that although part of his mandate includes building out First State’s existing investment capabilities, a large part of his job will be turning the business into a stronger player all round.

At the moment, the firm has a strong Asia-Pacific and emerging markets equities offering in the UK and parts of Europe. In last month’s Funds Europe we noted First State was one of just five asset managers to increase its equities  under management between 2007 and end-2009. The Lipper FMI data refered to European regulated funds.

But there are certain elements that are missing – one of the most evident is a fixed income capability.

“Our parent, the Commonwealth Bank of Australia, is the largest fixed income manager in  Australia so a fixed income acquisition would be a good fit for the firm in Europe,” he says.
But he’s in no rush. Withers is adamant he will not impulse buy and take up the first fixed income manager he comes across.

“We need to get it right. I need to find investment people – a business that is looking to generate  growth over the long term. We’re not just interested in making a quick buck,” he says.
And, according to Withers, finding people with the right mindset is rare, especially after fund management become tainted with investment banking practices.

He laments the fact that, especially pre-crisis, investment management moved away from the traditional approach and more towards an investment banking style of managing money.
“There are certain practices in the investment banking world that are not appropriate within investment management. Something like long/short investing can work in investment management but underpinning that needs to be a long-term horizon,” he says.

Withers says he spends a third of his time on searching for the right people or firms to hunt down.

And in fact, the crisis may have done him a favour.

“Many firms had a pretty bad experience over the last year and could very well have a bad year ahead. This could help me  since it would encourage people to want to join an institution like ours,” says Withers.

“While the good times roll, my job becomes more difficult. Another little dip would make my life lot easier!” he says.

Withers says First State is not measuring its expansion in terms of an increase in assets under management (AuM). “I am just as likely to be interested in a small firm or small team as I am in a large firm,” he says. “It is not about increasing our AuM to a certain amount, but rather about having a broader investment capability.”
Lessons learnt
The market turbulence experienced over the last few years  shouldn’t faze Withers because he has much experience in crisis management, particularly from the insurance sector.

Withers was CEO of Norwich Union Life at a time when life insurance companies hit bumps in the road. Withers was also running the traditional investment business of Credit Suisse when money markets began to have problems.

“It [the money market problem] was a major asset management crisis, and my experience at Norwich Union Life was invaluable in helping me navigate my way through it. I saw life companies go insolvent and that was hugely helpful,” says Withers. He got through that, but says: “I’ve done crisis management and I don’t want to do it again!”

When he ran for the post at First State, Withers says: “It was wonderful to speak to an institution that essentially had no problems and was looking to grow its business. That was definitely part of the appeal for me.”

Over the last six months, Withers has been getting to know the business, its people and more importantly, its culture and philosophy.

“Now growing the business is the next stage and that is bound to be more challenging,” he says.

As well as adding to the company’s investment capabilities, Wither’s has also been assigned the task of building out First State’s distribution across mainland Europe.

“We already have a good reputation in the UK retail market and some institutional recognition in Europe – Paris, Scandinavia, Germany and Switzerland,” he says.

Withers aims to build on these current links and break into both wholesale and retail markets in these countries, he says, adding: “We need more depth in Europe.”

Asked about other continents, Withers says the firm hasn’t pushed its presence either in the Middle East or in North America, although it does have clients in both regions.

“In time we will set up operations in North America, but at the moment I don’t have the capacity to do so,” Withers says.

Withers is as much tasked with increasing First State’s capacity to take on new clients as he is increasing geographical presence, and he says capacity will increase as market share increases. The rise in its equities business over 2007 and 2009 was by €3.1bn, or 31%. Withers explains: “We have enough business flowing so we’re trying to be cautious and control our growth.”

He gives Asia as an example of where rapid growth could spell a company’s downfall. “There has been a huge maturing of the markets in Asia and the improved governance does broaden the investable universe. But the Asian markets could reach bubble proportions very easily,” he says.

So it seems that when it comes to investment, Withers is happy to err on the side of caution and sacrifice some of the short-term gains for longer term stability.

When it comes to growing the firm, he sounds just as patient and is happy to wait for the right opportunity to come along.

©2010 funds europe

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