With a reputation for thought leadership, Elizabeth Corley, CEO-designate of Allianz Global Investors, tells Nick Fitzpatrick which writers and thinkers have shaped her world view as she steers AGI through the euro crisis.
“I read one of her books once. I hoped I wouldn’t enjoy it, but I must admit that I did.” So says an Allianz Global Investors Europe employee speaking about Elizabeth Corley’s literary output.
Corley is the firm’s chief executive who has also found time to establish a career as a crime novelist, slightly to the envy of the employee who, like many of us, spends enough energy maintaining just one career. However, Corley tells Funds Europe she has not found time to write lately.
There is, of course, the future of Allianz Global Investors (AGI) to concentrate on. One of the world’s largest managers with €1,400 billion of assets, it is owned by Munich-based financial services group Allianz SE.
It has been reorganised into a discrete part of the newly created Allianz Asset Management - the other part being Pimco - and Corley will have a global AGI role from January 2012.
And finally, the firm – like all its peers in active management – is in unchartered territory as it navigates the stormy waters of the euro and financial crises.
You could say it’s the rainy season and AGI, along with Corley’s crime novels, are paddling up the Amazon.
Despite this, Corley has at least managed to find some time for reading. Asked how the financial crisis has influenced her reading matter, the answer yields a bit of a surprise: Darwin. “I’ve delved into Darwin again,” she says, citing his 1876 classic, On the Origin of Species. “It’s about what it takes to adapt to an environment. What many people don’t realise [about Darwin’s theory] is that it is not about survival of the fittest, but about surviving through the ability to adapt to a new environment, and this is highly relevant to the asset management industry today.”
Saying that Darwin inspires on a philosophical level, she also lists a more nuts-and-bolts crisis text: A Colossal Failure of Commonsense – the inside story of the collapse of Lehman Brothers, by Lawrence McDonald and Patrick Robinson.
“It’s a very, very good book. I read it about 18 months ago. It tells you about the importance of avoiding ‘group think’, the importance of accountablility, and of risk controls that are impervious to the influence of a very charismatic chief executive. The book is like a checklist of what all companies need to do.”
And one more classic – Anthony Trollope’s The Way We Live Now – made her list. Dealing with the world’s second most famous Ponzi scheme, the book provokes a debate about whether business ethics should be absolute in nature.
“If it is believed a certain behaviour is acceptable, people will say ‘they are doing that, therefore I am going to do that too’.” Corley cites re-hypothecation of assets – basically, the near relentless use of others’ assets for gain – as an example.
Adapting to the next quarter-century
Asset management revenues have risen over the past 25 years in line with markets. But if poor market growth holds back income from now on, how should asset managers adapt to this new environment? In some ways part of the answer might be obvious. It centres on the next crisis: pensions.
Corley says her business is investing more in the pensions solution space. “I knew there was a strong case for this in Europe,” she says, “but I didn’t realise the level of demand for it in Asia.”
AGI signalled its focus here in November when the firm announced that its Pensions Sustainability Index revealed Greece, India, China and Thailand had the greatest need for pensions reform.
The investment in more pensions solutions runs parallel to the past 12-month period where AGI has seen a bigger demand for risk- and outcome-based solutions from clients, including pension funds. Corley says that pension funds have tended to look at their liabilities and have then sought AGI for asset allocation advice.
Partly because of ties with its insurance parent, Corley feels AGI has a strong proposition for risk and outcome products.
“When we look at creating a solution for a particular pension plan, there are so many things we can pull together. Not many companies can do that,” she says.
Risk- and outcome-led products for pension funds both in Europe and Asia look set to be a key theme on AGI’s agenda now and in the future. Apart from this, though, Corley would not say much about the year ahead in terms of what the recent restructure – caused by the retirement of Allianz’s asset management head, Joachim Faber – entails. Though asked specifically about outsourcing of operational functions, she did say that the business was looking at more of this.
She said it was hard for AGI to find an appropriate third-party provider of transfer agency in Asia. The task is still carried out in-house.
But she also mentioned that one of the smartest outsourcing moves the business made in recent times was to contract out its European and Asian client relationship management (CRM) system to a cloud-enabled proposition from Salesforce.com. The move was very cost-effective and ended the challenge of finding a common CRM platform for Europe and Asia. Corley described this as one of the firm’s “best breakthroughs”. She is positive about the innovation of cloud computing.
Strategy is not the only activity that has commanded more of Corley’s time. “We’ve held vastly more conference calls than we ever did before. The number of people dialling in goes up and up,” she says.
“When you called clients in the past, they thought you were interfering. Now they are ready to talk for 30 or 40 minutes. They are keen to talk because they want information from people they can trust.”
Investors’ new appetite for information from their investment providers is almost certainly a result of uncertainty. Corley highlights that her clients particularly seek information about dealing with volatility.
It is also a sign that more thought is going into investment strategies, and a consequence of this is that clients take longer to fund strategies once they embark on change.
However, even if more time is spent over due diligence and on monitoring strategies prior to funding them, clients’ decisions are now very well thought through by the time they do act, Corley says.
Corley says she is surprised that AGI has seen net positive equity inflows over 2011, but adds the year has turned out better than anticipated. “This year has been better than we expected it to be twelve months ago. The economic outlook was very questionable and my biggest fear was that clients would take no action, meaning no new business. But clients have given us a lot of work.”
Looking forward, she doesn’t want to think about worst-case scenarios. “The worst-case scenarios are too terrible to think about,” Corley says.
For the time being, she must be hoping that, as Europe’s crisis unfolds, her corporate leadership through this period will deserve the same write-up that an Amazon reviewer gave her particularly dark book, Innocent Blood: “A deeply unpleasant topic, yet she handles it superbly well.”
©2011 funds europe