Voya Chief on Shareholders, Clients, and Strategy Post-ING

(June 16, 2014) – The paint is still fresh in the newly renovated offices of Voya Financial, the spin-off of ING’s US retirement, money management, and insurance operations mandated by a recession-era bailout.

As of last month’s official rebranding, American institutions invested with ING became clients of Voya Investment Management. But beyond the bright orange logo and new name, CEO Jeffrey Becker recently stressed how little change asset owners will notice in their reborn manager.

“Over the last four-plus years, we have developed a roadmap for the spin-off and systematically stuck to it,” he told aiCIO from a boardroom in Voya’s midtown Manhattan headquarters. “Our personnel has stayed in place; our performance has remained strong. Large institutional investors expect that nothing changes.”

Voya’s life as a discrete entity from ING began in earnest with its initial public offering (IPO) last spring. The stock—trading on the New York Stock Exchange as VOYA—entered the market at $19.50, below its intended range of $21 to $24. Still, as Becker pointed out, the stock outperformed its peers in the year following its initial release.

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The potential misalignment of interests that so often worries investors when a manager goes public is a valid concern, Becker acknowledged. Serving two masters—short-term focused shareholders/analysts and long-range institutional clients—has undermined firms in the past.

“I suspect there are several who have regretted the decision to launch an IPO,” the CEO said. “If you are a small to mid-sized player in the asset management industry, you likely have no business being public.”

With $514 billion in assets under management and advisory as of the end of 2013, no one would classify Voya Financial as “small to mid-sized.” Still, the asset management division represented just 14% of its $1.2 billion pre-tax earnings. Here, according to Becker, being relatively small acts as an advantage.

“Investment management represents a core part of Voya, and we are the fastest growing division,” he said. “But we’re still just 15% or so of the company, which means I don’t have to focus too much on quarterly earnings.” From a business strategy perspective, Becker’s time horizon seemed to sit between those of stock analysts and of his clients.

Whether as ING, Voya, or something in between, the investment management group has remained committed to its overarching style. “We’re a high-quality, low-volatility manager,” he said. “We’re bottom-up, fundamental stock pickers.” Markets have been less consistent in favoring the investment strategy.

“2013 was not a year for us,” Becker acknowledged. Even before accounting for fees, the roaring S&P 500 beat out many of Voya’s hallmark, actively managed equities funds, such as the $465 million core research fund. Likewise, on the fixed-income side, the firm’s half-billion dollar global bond fund trailed Barclays global aggregate index in 2013, as well as three out of the last five years (again, gross of fees).

As public markets have become more amenable to active strategies over the last few months, Becker said he and his team have been “amazed” at the reversal of investor appetite for them. Domestic-oriented stock, bond, and blended strategies have attracted the bulk of Voya Investment Management’s $213 billion in assets—$127 billion without its own insurance general account capital.

Becker, though adamant the firm won’t stray from its roots, has his sights on a few areas for “major growth,” including unconstrained fixed-income products. “Overall, I see a trend towards ‘dis-aggregating the aggregate.’ Bond-type assets play a crucial role in retirement portfolios, and that’s not going change.” The CEO concluded by channeling Mark Twain: “The reports of fixed income’s death have been greatly exaggerated.”

(June 16, 2014) — The Qatar Investment Authority (QIA)’s asset allocation behaviors are becoming more conservative to fall in line with the nation’s economic development agenda and stronger presence in the region, according to GeoEconomica.

The Geneva-based political risk management firm said the once “aggressive deal hunting” sovereign wealth fund—guided by former CEO Sheikh Hamad bin Jassim bin Jaber al-Thani—had been less active during the past few months, passing on opportunities such as Deutsche Bank’s recent capital increase.

“The modi operandi of most sovereign wealth funds, in one way or another, mirror the political cultures and ambitions of the governments that own them,” the report said. “Qatar’s international position has most recently come under significant pressure and the Doha has to deliver on a massive economic development program over the coming decade.”

The report said Qatar’s foreign policy saw a major change when the Arab Spring unfolded. Instead of partaking in mediation efforts previously carried out by the nation, it backed its foreign operations with up to $20 billion in commitments to Arab countries in transition.

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In addition, the Doha’s recent move to put Qatar on the map as a global hub also began straining the nation’s relationships with its neighbors—with spillover effects on the $175 billion fund’s future investment policy, GeoEconomica said.

“Given Qatar’s economic development agenda for the years ahead, any sensible sovereign wealth investment policy will necessarily have to factor in the uncertainties and risks that the country is and will be exposed to in a tense geo-economic space,” the report said. “Qatar’s more exposed international position today might result in QIA taking a more holistic investment approach in the future.”

The firm hypothesized that QIA would operate as a more institutional investing entity with less of a political agenda by observing the following:

1) QIA may have to commit its investment policies more closely to the Santiago Principles—the generally accepted principles and practices for sovereign wealth funds—positioning it well in the international realm of investors.

2) The Qatari government may have to determine what role QIA will play in diversifying the national economy, particularly if and how QIA may contribute to securing investments outside the energy sector.

3) QIA may have to serve as a “substantial financial buffer” alleviating the impact of a number of risks that could affect the nation: slower growth in developed and emerging markets; a rush of market volatility; potential financial stress in the Eurozone; a decline in oil and gas prices; and increased geopolitical tensions.

“It is probably that sense of new realism that should determine QIA’s investment behavior over the coming years,” the report said.