Peter Preisler, head of EMEA at T. Rowe Price, is a contrarian. He dislikes ‘hyped’ products, such as 130/30 funds, and he prefers Africa to the Brics economies, finds Angelique Ruzicka
Peter Preisler, director, head of EMEA at T. Rowe Price Global Investment Services, is not one for mincing his words and has a few good opinions on how the European investment management industry can improve. “One of the reasons why I am sitting in the chair I am today is that I wanted to be in a company where the company’s integrity is just as high as my own. I didn’t want to go and sell things to people that they didn’t really need,” he says.
In his opinion there are a number of products that are being oversold, particularly the newly hyped 130/30 products. “Those that have had problems generating alpha for some reason think they can take 130% of the problem they had and just short 30% and then believe it should be good for the client. I don’t think that is valid, the financial markets in general have a tendency to overshoot. Around 50% of all new products come into the market, not because the clients need to buy them, but because they need to sell them and we want to stay away from that. It’s the corporate policy and the policy of the people we hire. We only build long-term relationships by having a long-term perspective on everything we do and that was one of the things that attracted me to join this company,” he says.
Making a mark in Europe
As head of EMEA, Preisler’s remit is to oversee the sales and client service efforts in Africa, Europe, the Middle East and Asia, including the expansion of T. Rowe Price’s activities into new markets. He joined T. Rowe Price in 2003 after working for Danske Bank International S.A. Luxembourg where he was president.
After four and a half years, he well remembers how difficult it was in the beginning for T. Rowe to wedge its foot in the European marketplace’s door and make its name known. “T. Rowe only came to the European marketplace in 2000/2001. Before that there was a joint venture with Fleming Group that kept T. Rowe away from the European marketplace. It meant T. Rowe could not attribute to business development in the European area. But that was eventually dissolved in a friendly manner, the doors were open to T. Rowe.”
But instead of making a speedy entrance into the European market after the barriers were removed, T. Rowe Price held back and entered the market gradually. “The expansion beyond the US had to be in line with the overall culture of the company, which is a very measured, controlled and conservative approach. We don’t just parachute in, we do due diligence on a regular basis on all potential territories, so we look at countries one by one and break them into ‘not of interest’, ‘let’s keep them under observation’ and ‘this is good potential for us’,” explains Preisler.
Now that it is established, T. Rowe Price can afford to be picky about who they want to do business with in Europe, feels Preisler. “We identify the best buyers and concentrate on doing business with them. We only want to meet people where it’s meaningful use of their and our time,” he says. “One of the easiest things to do is enter into a torrent of third party distribution agreements. I can probably get a hundred distribution agreements but we want to be cautious and only do business with those where there is a match with the way they represent us.”
Preisler feels that relationships with distributors have come to a point where established firms, such as T. Rowe, can start asking for things in return for the high prices they pay. “I think we’ve now reached the next generation of selection criteria in the third party world,” says Preisler. “Right now it’s all about us paying them but I think some of us are now in a situation where we can require certain things, such as not wanting to be represented in a highly speculated platform or misrepresented in commercials around the company. So if their philosophy is ‘flavour of the day’ we can say we don’t want to have our funds portrayed in that way. So if it’s too speculative and we think the guidance to investors is not serving their needs, but the needs of the providers, we may turn business down. And we have done so in the past.”
Preisler can certainly afford to turn business down, if it doesn’t match the company’s criteria, as T. Rowe is in a comfortable position of already having good relations with several major distributors across Europe, including Hansabank in Estonia, SEB in the Nordic region, UBS in Switzerland and Preisler’s former employer, Dankse Bank. Even though T. Rowe has relationships with some of the giants of Europe, Preisler does not discount working with smaller businesses. “There are plenty of good banks in Switzerland and Luxembourg but then the smaller banks can do well too. So it doesn’t mean that I am staying with the ‘old ladies’ but I do want to make sure that the profile with the organisation is in line with ours,” he says.
Moving towards Mifid
Preisler has often criticised the industry for its lack of transparency and the fact that it pays its distributors too much and here he reiterates his point. In his view the Mifid (Markets in Financial Instruments Directive) could not come soon enough. “I am looking forward to Mifid because the clients can get something out of it. The fund market needs transparency. The whole European market has been driven by motives other than serving the client. I think trading fees are high and I think the distributors get well paid. It [Mifid] will take a while, but it’s a step in the right direction because it will lead to clients getting more relevant service and products.”
T. Rowe Price currently has a diverse product range, which includes 18 different funds, but this wasn’t always the case. In the past, the product range was narrow and wasn’t enough to impress distributors. Preisler admits that at first, the company was not on major distributors’ radars. “We had too narrow a product range in the first few years. While the funds we had were good, the feedback was that we didn’t have the diversity in our platform to be interesting. We are now in a position where we have relevant global and regional products and a few sexy products too, like our natural resource products and our recently launched Middle East and Africa Sicav range.”
T. Rowe Price launched the Sicav range last month and instead of building an investment strategy on the much-hyped Bric (Brazil, Russia, India, China) countries, the management firm went against the grain to invest in Africa and the Middle East. “T. Rowe is not exactly known for launching products where the hype is high. We think this is a relevant investment territory. There are some very interesting investment opportunities in the Middle East and Africa is a good supplement to the Middle East,” explains Preisler.
The fund is available to institutional investors and third party distributors and will invest in 25-50 stocks. “As it stands we have a good chunk of investments in the Gulf states and also in Nigeria and South Africa,” adds Preisler. Asked whether T. Rowe would invest in more racy African markets, such as Zimbabwe, Preisler refuses to contemplate the issue and reminds me about the company’s controlled conservative approach. “It’s not what our company is about. If the upside is huge then the risk is huge. You should go and buy a hedge fund if you want to invest in Zimbabwe.”
© fe October 2007