Cumming’s exit from Aviva shows the demise of fund management star culture

“I don’t see myself as a star fund manager,” Richard Buxton told the Financial Times in 2014, which of course is exactly what you’d expect from a star fund manager with any common sense in an interview.

It was a year after the former head of UK equities at Schroders left the UK’s biggest fund manager to move to Old Mutual, a year in which the fund he ran grew from 160 million to £1.1 billion, boosted in part by money from his former shop.

Three years later, another heavyweight made a shock move: David Cumming left Standard Life after 18 years, a departure described as a “big loss” for an investment house in the midst of a merger with rival Aberdeen Asset Management.

Cumming’s “mutually agreed” departure this week from Aviva Investors, where he was chief investment officer for equities, made headlines but less business angst. The unit is a small enough part of Aviva’s overall business not to bother the insurer’s investors.

But being a celestial body in the fund management universe isn’t what it used to be. Gone are the days when big names making big bucks wondered which boards or bosses didn’t cut it and took action accordingly.

Cumming’s exit is not a fallen star (and in any case, it’s hard to even register against Neil Woodford in this particular category). The Cumming-managed fund is up 62% over the past year, according to Morningstar Direct, compared to a category average of 24%.

The official explanation is that Aviva is building “a market-leading sustainable results franchise.” This appears to mean he is focusing on ESG and concentrating on areas where he thinks he can win business – which still includes UK and global equities despite cutting more than a third of his equities team. Around 10-12 people are thought to be leaving, in the US and France as well as the UK.

Sounds like a healthy dose of old-fashioned cost cutting. Stars don’t come cheap. And competition for external funds either: around 80% of the 370 billion pounds sterling under management of Aviva Investors comes from the insurer itself. Aviva, the group, is under pressure to cut costs, including from activist investor Cevian. It’s hard to see how culling doesn’t weaken the effort to make money from third parties.

The big names, perhaps, are no longer considered essential. The management of funds is increasingly depersonalized and institutionalized. The key person risk and tricky internal policies were probably enough to make companies favor a different approach.

But industry developments did the rest: the rise of cheap, manager-independent passive investing weighed on the weight of active managers (if not their fees in the UK, which have been remarkably resilient). The portfolio construction guys and the risk management whiz guys are the best. Even boutiques now tend to focus on their process rather than their people, says David McCann at Numis.

What is perplexing about Aviva’s focus on ESG here is that Cumming has long spoken out on governance issues such as executive compensation; he recently criticized Deliveroo for workers’ rights and its two-class shareholding structure.

This is another area where active managers have generally lost some of their influence, with decisions being outsourced to proxy firms such as ISS and the growing influence of governance teams or centralized management. But Aviva argued that the partnership between stock pickers and stewardship is particularly effective.

Engine No 1, the titchy hedge fund with an even more titillating stake in Exxon, showed this year that size doesn’t necessarily equal impact in the sustainability world. And an industry that has the religion of stakeholder concerns while cooling off on personal branding or visibility may be missing a trick.

ESG investing can’t just be about marketing, screening, standards and data (particularly because the latter isn’t very good right now). At some point you have to stand up and yell when something stinks. Without it, it’s likely to make less of a difference – and be considerably less interesting to boot.

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Letter in response to this column:

The key to successful ESG investing is communication / By Robin Hindle Fisher, Sloan Fellow, London Business School, London NW1, UK

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