The Big InterviewMichelle ScrimgeourColumbia Threadneedle Investments

Columbia Threadneedle’s CEO, EMEA, Scrimgeour: Asset management industry is in the middle of a ‘perfect storm’

The winners and losers in asset management over the next five years will be decided by how firms cope with this “moment of disruption”, according to Michelle Scrimgeour, chief executive, EMEA, of Columbia Threadneedle Investments.

Scrimgeour says the industry is now in the middle of a “perfect storm” and it will be groups who respond the best to issues such as the rise of passives, a tougher regulatory environment and Brexit that will come out on top.

The chief executive, who joined Columbia Threadneedle Investments in April last year after previous roles at asset managers including M&G and BlackRock, adds the challenges these disruptive forces present mean it is crucial to focus on the foundations of the business in order to be successful.

“There are areas where I have felt we are punching below our weight and areas we can grow,” Scrimgeour says. “It is making sure we are as well positioned as possible to navigate all of those challenges.

“We need to think about what the organisation of the future is, what kind of firm we want to be and making sure we are the employer of choice in attracting the right talent.”

European expansionOne area of growth, the CEO says, is further expanding the group’s franchise into the rest of Europe.

Scrimgeour says the asset manager will be investing over the next two years into putting additional people, marketing and compliance resources in Europe, while launching additional products for its Luxembourg-domiciled SICAV range.

She adds the UK’s vote to leave the European Union in June 2016 had given this move more “impetus” but it would have happened regardless.

In May, it was announced Columbia Threadneedle was set to transfer its $9.7bn EU customer assets from UK

OEICs to equivalent funds in its Luxembourg range amid Brexit concerns.

Some 20 funds from the firm’s OEIC range will transfer assets to the equivalent SICAVs, with the firm planning to launch 13 new funds on its SICAV platform.

“The biggest area for me is leveraging what we have been able to do in the UK into Europe,” she says. “We have an established business already in Europe and an established range of funds in Luxembourg, so it is adding to that.”

In particular, Scrimgeour says the firm will be targeting markets in Germany, Italy and Spain as they are areas where Columbia Threadneedle already has a “strong” offering.

“It is an opportunity to go deeper into those markets,” she says. “They are open and they are regions where we feel with our expertise we can do more, therefore they are the right places to start.”

However, Scrimgeour says she is confident London will continue to remain a very strong financial centre, despite the risks stemming from Brexit, due to the “remarkably resilient” nature of the UK’s financial services sector.

In its Brexit White Paper published on 12 July, the government backed down from its calls for mutual regulatory recognition post-Brexit and said it will now push for a deal that will see UK and EU financial services firms’ access to each other’s markets being scaled back when the country leaves the bloc.

“The reality is Brexit is both a challenge and an opportunity,” Scrimgeour adds. “It gives firms the chance to rethink how they are facing the market but we have no plans to move our headquarters in Europe from London.

“The government’s white paper is a further step in the complex process of exiting the EU. Like all businesses, we are looking for certainty and greater clarity as soon as possible so that we can plan ahead with confidence. Ultimately, what matters is that

Tom Eckett speaks to Michelle Scrimgeour, chief executive, EMEA, of Columbia Threadneedle Investments, about coping with disruptive forces, the impact of Brexit and how the industry can improve diversity

Brexit gives firms the chance to rethink how they are facing the market but we have no plans to move our headquarters in Europe from London

Columbia Threadneedle in the news this yearJuly

Asian equities head Vanessa Donegan to retire from Columbia Threadneedle

JuneColumbia Threadneedle re-hires high yield head Roman Gasier

May Columbia Threadneedle to transfer $10bn of EU assets to Luxembourg range

April Columbia Threadneedle launches OEIC version of Global Focus fund

March Columbia Threadneedle expands absolute return credit range with Luxembourg launch

FebruaryColumbia Threadneedle’s property head Don Jordison to retire

INVESTMENT WEEKinvestmentweek.co.uk 23 July 2018

CV: Michelle Scrimgeour2017-PRESENT CEO, EMEA at Columbia Threadneedle Investments2012-2017 Chief risk officer, M&G2006-2011 COO, International Fixed Income, BlackRock

2005 Global head of fixed income product, Merrill Lynch Investment Managers2002-2005 Head of alternative investment group, Merrill Lynch Investment Managers

1989-2002 Various roles, Merrill Lynch Investment Managers and Mercury Asset Management

the final Brexit deal protects savers and investors both in the UK and across the EU.”

DisruptionOn the potential opportunities for the business, Scrimgeour says looking to package the firm’s active capabilities through other vehicles such as ETFs was an area worth considering.

In 2016, Columbia Threadneedle acquired smart-beta provider Emerging Global Advisors in the US, which enables it to offer “strategic beta” products, especially in emerging markets and the environmental, social and governance (ESG) space.

“ETFs are just a way you package products. We are taking what we do as an active house and offering that to clients in a slightly different way. This is not a core focus for us at the moment but over time I can see that

becoming a part of our armoury.“We are an active manager so if people want that as a

building block that is good for choice,” she continues.Another area of potential disruption to which Columbia

Threadneedle is adapting, Scrimgeour says, is the technological upheaval taking place across all sectors.

She says it is crucial to be on the right side of change, which is why the firm last year installed Aladdin – BlackRock’s $15trn investment platform whichcombines risk analytics with portfolio management,trading and operations tools on a single operatingsystem – and it is currently closely observing blockchaindevelopments.

“The pace of change is considerable and you need to be well positioned not to be caught off guard.

“We have been quietly building out what we have in terms of our underlying infrastructure as it is very important firms get that right,” she says. “Operationally, you have to be very strong.

“From a client’s perspective, we want to make sure our people who are talking to clients have as many of the tools as possible to ensure those conversations are as rich as possible.”

On the impact of increasing regulation on the sector, she warns this is more of an issue for smaller firms due to the significant cost burden and higher barriers to entry.

Scrimgeour adds it is too early to consider the unintended consequences of MiFID II, which came into effect on 3 January 2018, but she is “interested” to see what would happen from a research perspective.

“There has been significant regulatory change but we are positive about it,” she says. “The barriers to entry for smaller firms are higher than they have ever been in terms of regulation and that is a reality and an unintended consequence of increasing regulation.”

DiversityMeanwhile, in terms of tackling the issue of a lack of diversity in the industry, the CEO identifies the hiring process as key in improving representation across the asset management sector.

Furthermore, she adds supporting programmes such as Investment20/20, which has helped 1,000 trainees enter the industry through links across 3,000 schools, colleges and universities over a five-year period, is vital if it wants to attract a diverse range of employees.

“It is not an HR issue, it is a business issue,” she comments. “Diversity is not just about gender but how you create a better balance across the organisation and build for the future.

“The fact that we are required to be open and publish data is a real step forward as an industry. Continuing to be open and honest about the fact we are not where we want to be is important.”

On Columbia Threadneedle Investments’ gender pay gap numbers, which at 29% were slightly higher than the average of 26% across the financial services sector but lower than the 40%+ reported by some asset managers, Scrimgeour says it is an issue which needs to be tackled across all levels of the business and most importantly by making sure the policies and procedures are in place to increase the number of women in senior roles.

“I am not happy with the gender pay gap,” she says. “We know why the numbers are there in asset management.

“It is something you have to do over time and it is important to make your organisation attractive to work in. You have to tackle this at all levels, systematically, over a period of time.”

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