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Old Mutual Builds on Strengths But Recognizes Weaknesses


South Africa-based Old Mutual PLC which is better known in Europe, and in particular the U.K., hasn't exactly become a household name in the U.S. - yet. But the firm gets an "E" for effort.

With its U.S. asset management hub based in Boston, Old Mutual has been building - and weeding - among its now 20 affiliated, institutional-quality investment management subsidiaries. It has also been focused on growing its array of 28 predominantly subadvised mutual funds and wealth management solutions. That's in anticipation of the millions of individuals on the cusp of heading into retirement. The firm has also been at the center of a multi-million dollar two-pronged, multi-media advertising campaign that began with grabbing the attention of the financial advisors it distributes its investment management products through and has since expanded to reach out to investors with its memorable "That's So Old Mutual" ad campaign.

MME Editor-at-Large Lori Pizzani recently sat down with Old Mutual Asset Management's Kevin Hunt, 56, the firm's executive vice president, and chief sales and marketing officer who joined Old Mutual in April 2002 to discuss what the firm has excelled at and what business areas it would like to enhance. Hunt will retire from his Old Mutual position next month. A replacement has not yet been publicly named. But many also know Hunt as the current chairman of The Money Management Institute, an organization he is fiercely dedicated to. Hunt will shortly relinquish his chairman title and settle into the one-year chairman emeritus position with the wealth management organization, still being very much involved in the organization's efforts.

MME: In what areas has Old Mutual US done well and where do you feel improvement is needed?

Hunt: We have had very strong growth. We now have 20 affiliated firms with $334 billion under management. Assets are up significantly from $123 billion a few years earlier while our number of affiliated companies is down from 27.

MME: What caused a thinning of the ranks?

Hunt: Some affiliates we've handed the keys to. They were mostly smaller, non-institutional quality firms that didn't buy into our Old Mutual model. Others were sold, like NWQ which was sold to Nuveen.

Right now, on a dollar-weighted basis, 83% of our assets have outperformed their benchmarks for the three-year period, with 95% outperforming their benchmarks over a five-year period.

I give credit to Scott (Powers, Old Mutual's CEO) who handed our managers their independence and a profit sharing program. We also centralized accounting, regulatory and compliance and other areas where the smaller business owner faces challenges. That allowed them to be independent.

MME: What challenges do you face?

Hunt: It's hard to run this business. You need people with deep experience so when issues come up, you can deal with them. Scott and I need deep and talented people. Our employees, if they're doing their jobs well, should each day be asking, "What can I do for an affiliate firm?" not "What economics can I derive from them?"

MME: What other challenges does Old Mutual face going forward?

Hunt: We see our challenges as two-fold. We have the Baby Boomers and the $10 trillion they will move to retirement mode. We want to be a part of that. To begin that, 3-1/2 years ago we created a retail group in Denver; our mutual fund complex. And we've created retirement solutions within our asset management unit that tie-in with our insurance unit. We have more of a mindset to educate. Chris Herman (vp, director of Old Mutual's Retirement Solutions group) came over from Mercer and runs our retirement center of excellence.

The biggest challenge is to get it right. There will not be one solution for all investors. It will be driven by the quality of advice and not product-driven. Successful solutions will combine distribution, asset management and technology.

We will be rolling out an asset allocation, target date product with a risk function in a few months. We are working with Ibbotson (a subsidiary of Morningstar) to develop that. Investors should be able to choose how they want their allocation.

The big challenge is that, at the end of the day, there will be lots of people who will not be able to retire in the manner they would like.

MME: How has the ad campaign done?

Hunt: We have seen some very strong results. Are we a household name? No, but it gets us there. Hitting all of the media helps carry us through. TV ads get quick attention but we back that up with print ads. We've seen a lot of people coming to the oldmutual.com website that we have in those ads.