The phenomenon of US movie stars crossing the Atlantic to tread the boards on the London stage is now well established – and it looks like the same thing is now happening in the pensions and asset management field.
The latest high profile transatlantic transplant is Mark Anson of CalPERS, who’s crossing the pond to join Hermes as chief executive. Although he probably won’t attract quite the same interest as Madonna or Nicole Kidman, his arrival will nonetheless be closely watched by those in the UK and European investment community.
Incidentally, he’s not the first senior CalPERS figure to relocate to London in the last few years. In 2002 former CalPERS CEO James Burton joined the World Gold Council as chief executive. In fact it was Burton who appointed Anson as CIO in 2001 after the shock departure of his predecessor Daniel Szente.
At the time Burton hailed Anson’s “sterling credentials” to step in and “hit the ground running” after Szente quit amid a dispute about pay. CalPERS was in a state of shock after Szente left and Anson will have gained a lot of kudos for steadying the ship.
Although that was only four years ago, it is worth remembering what conditions were like at the time. The busting of the dotcom boom had cut a swathe through the market and then there were the September 11 attacks. CalPERS itself even put out a statement affirming its faith in the US
financial markets.
Anson joined CalPERS in 1999 as a senior principal investment officer for domestic equities. Before that he was a portfolio manager at OppenheimerFunds and also worked in equity derivatives at Salomon Brothers. He was also a lawyer specialising in securities and derivatives regulation. He’s written three books on the financial markets and numerous trade publication articles.
At Hermes, Anson will replace Tony Watson and become the latest in an illustrious line of CEOs at the firm which is owned by the BT Pension Scheme. Apart from Watson himself, there is also Alastair Ross-Goobey, the son of ‘cult of equity’ founder George Ross-Goobey and currently head of the International Corporate Governance Network.
Sir Tim Chessells, chairman of the BT Pension Scheme, warmly welcomes Anson’s appointment, saying he’s a worthy successor to his predecessors. Chessells says Anson has a very clear, rational and thoughtful approach. “There aren’t many of these people,” he adds.
“I’m delighted that Mark is joining us,” says Hermes’ chairman Richard Bernays. “He is a well known and highly respected figure, of international stature, in the world of fund management and corporate governance.
“He has the ability to think strategically; he has built a team at CalPERS which has delivered outstanding investment performance. And he has driven the organisation forward into new asset classes and he has built up a significant number of third party mandates. He will bring a different perspective to Hermes, to build on the excellent work undertaken by Tony and his team to date.”
Anson himself says: “Hermes has a huge reputation and outstanding people and I’m delighted to be joining such a successful and dynamic team.”
Anson is an obvious fit for Hermes due to his experience in terms of managing large investments and having a public profile. Then there’s corporate governance, with both CalPERS and Hermes at the forefront of the area worldwide.
The recruitment of such a well-known and respected investment figure can only be seen as a coup for Hermes – but what would have attracted Anson to Hermes?
He may feel that it’s ‘job done’ at CalPERS, after four years in the top investment job that has seen assets rise to $195bn (€166bn). The fund has hauled itself out of the aftermath of the equity market bust and handled the threat of being turned into a DC fund by California governor Arnold Schwarzenegger. He may have felt there was nowhere else for him to go.
One attraction would surely be the kind of salary that Hermes can offer. At CalPERS, Anson’s last salary was a respectable $432,000 with potential bonus of more than $300,000 on top of that. But Hermes’ top management are known to be among the highest paid asset management executives in the City of London and can earn many millions.
Anson would fit almost exactly a brief to a headhunter for a CEO at Hermes. He’s clearly got the investment skill, the managerial competence and has developed a reputation for having a deft political touch.
Anson has some interesting ideas about the way money should be managed. Earlier this year he put forward the idea that pension funds should pursue alpha independently from beta. He reckons schemes should move away from the traditional model and stop trying to get excess returns from their beta portfolio.
He says funds looking for outperformance should aim at inefficient markets and sub-assets, like distressed debt. He recommends “thinking outside the benchmark but remembering that there is no ‘superior asset class’”. Anson has also said there is a potential convergence between the hedge fund and private equity markets.
One question mark over the appointment of Anson is the fact that he’s stepping for the first time out of the investment sphere and into a more operational management role as chief executive.
There will be a couple of issues in his in-tray when he eventually gets to his desk in January. One is an undercurrent that Hermes itself is paying itself too much – the pay of its top executives has generated headlines in the UK press.
Another issue is Hermes’ ongoing spat with the Korean financial authorities. This issue involves allegations that the firm was involved in manipulating the price of shares in electronics firm Samsung in December 2004. Hermes refutes the charges and says that such an action would “directly conflict” with its long-standing business principles. Whatever the rights and wrongs, until the matter is resolved it will be a running sore.
Anson is also one of the pension industry’s most prominent supporters of hedge funds, having taken the fund into the asset class. He testified to a Senate Committee that he thought there were disadvantages to registering hedge funds with the SEC.
He said at the time: “Part of the keen interest in hedge funds has been their unregulated nature that allowed hedge fund managers to seek economic returns from non-traditional investment strategies.”
He believes “burdensome regulation” could have two adverse consequences. First, it might reduce the returns by restricting investment strategy – making hedge funds less desirable to investors. Or managers might go offshore – which would reduce the investment opportunity set for US.
Under Anson CalPERS was the first US scheme to pursue environmental investment initiatives aimed at achieving positive financial returns while fostering sustainable growth and sound environmental practices. On the more political front, it has the controversial permissible equity markets approach, introduced in 2000, to decide which emerging markets were permissible for the fund. This caused some angst in the Far East.
And the fund credits him with taking both its investment and corporate governance agendas forward – “helping to shape market reform initiatives to tackle egregious executive compensation programmes, enhance transparency of corporate environmental liabilities, and strengthen hedge fund regulations”.
Anson was recently invited to a conference on pensions in China. Unfortunately he was unable to enter the country from Hong Kong due to problems with his visa. Let’s hope his entry into the UK will be a little less problematic.