Since 1983, Optimix Vermogensbeheer has worked closely with high net worth clients. The company recognises that capital preservation is sometimes the better option ahead of capital growth, and to this day continues to keep its clients’ best interests at heart.
Optimix was acquired by Handelsbanken Netherlands in 2016, and together the two firms have become a leading wealth management force within the country. World Finance spoke to Michel Alofs, Managing Director of Optimix Vermogensbeheer, and Ivan Moen, Head of Investment at Optimix Vermogensbeheer, to discuss the company’s origins, how the industry has changed, and the newly merged company’s future plans.
What are the biggest wealth management trends in the Netherlands?
At Optimix Vermogensbeheer, we see consolidation as one of the biggest trends in the wealth management industry. The regulatory environment has an enormous impact on the industry, and will remain a key driver for the foreseeable future.
Stricter compliance rules and regulations, along with looking ahead to the implementation of MiFID II and the payment service directive PSD2, will have a large impact on most financial organisations.
The same is true for investments in ICT and developments in financial technology that are driving innovation across the financial industry. To finance these investments and create a longer-term viable business model, scale is needed, and we are seeing a trend towards consolidation – a consolidation between banks and specialised wealth managers, and between wealth managers themselves.
Throughout 2016 there were clear examples of this, with the merger between the Belgian bank Delen and the Dutch wealth manager Oyens & van Eeghen. The two private banks Insinger de Beaufort and Theodoor Gilissen also merged, and Handelsbanken acquired Optimix to create a full service bank for high net worth individuals in the Netherlands.
Due to our expanding local presence, supported by state-of-the-art technology, we are able to create a profitable business centred on our clients’ needs
New technology is a major wealth management trend across the Netherlands due to the rise of online wealth management tools and robo-advisors. This will have a big impact on the industry and will define most of the technology investment calendars that are used. At first, this will quickly affect retail and those that are affluent within the wealth management market.
The standardisation of wealth management products will also be a major wealth management trend, as it is one we are seeing in the Dutch market right now, especially with the larger industry players. These products are easy to service and easily scalable. This will give smaller players operating with specific clients or niche investments, like Optimix, more possibilities to differentiate themselves.
The passive-active debate in asset management is also a core trend. Providers of passive investment strategies clearly win market share, which has gained traction recently due to regulatory changes including the ban on commissions, rules about cost transparency and the ban on fund rebates. Whether this trend will continue remains questionable.
Given the current extreme interest rate environment, it’s unclear whether this is the right moment in time to fully rely on these passive strategies. Optimix believes in mixing passive and active investment styles in its portfolios.
What have been the most significant changes to the industry recently?
Regulatory pressure has been a very important driver behind one change within the industry. The ban on commissions and rebates has created significant changes within private banks’ and wealth managers’ business models. It has changed the economics of the industry in an important way.
The rebate ban has also helped the providers of passive investment strategies to gain a market share within the Dutch market. The call for more cost transparency has caused a switch from the transaction-based fee models towards all-inclusive fee arrangements. Furthermore, the rebate ban on the sales of investment funds has led to margin pressure within the industry. Looking ahead, this pressure will not diminish.
MiFID II and PSD2 will have a lasting impact on the financial industry, and this will also lead toward more standardised products within the wealth management industry. It has also led to a reorganisation and restructuring within the industry, along with staff reductions and an increased focus on technology.
Standardised products accompanied by online service tools and help desks have replaced labour-intensive services like the personal private banker. This is a clear trend that is still underway, especially with large domestic Dutch banks.
Finally, greater cost transparency has resulted in more providers of index-based products and standardised solutions supported by web-based tools. It can be argued that costs are a more important driver for choosing a wealth manager for ‘softer’ services or investment returns. This has led to a one-size-fits-all product offering within large parts of the investment industry. Within this overall environment, we see enormous opportunities for Optimix and Handelsbanken to differentiate themselves.
How did Optimix bounce back from the global financial crisis of 2008?
Optimix did not suffer greatly from the financial crisis in terms of client losses and mandates. Of course, revenues came under pressure, but this did not lead to a reorganisation or change in our business model.
The stability and strength of our client relationships were a great help in weathering the storm, and from 2010 onwards we created the foundations for business growth. Our investment strategy played an important role, which was based on building a capital preservation portfolio with government bonds and strips, combined with a return portfolio comprising equities and other more risky assets.
Together these portfolios performed well and created a stable client environment. This approach laid the groundwork for our commercial successes years after, resulting in assets under management growth and healthy financials.
How has Optimix’s history in the Dutch wealth management market helped to secure its leading position?
Optimix was established in 1983 as a family office, open for a select group of external clients. As we have grown over the last three decades, the relationship with our clients has always been a key characteristic. Because of this, the company will not focus on the mass affluent or retail client segments, but on the high end of the
private banking market.
The wealth management industry is moving away from personal relationships – many companies are moving towards a service model solely focused on web-based services
This means that we focus on the client segment where we can offer wealth management expertise to all Handelsbanken customers, and tailor-made wealth management solutions for mandates valued at more than €1m ($1.06m). The Optimix brand is well known across the Dutch market due to the introduction of its first mix fund in 1983, known as the Optimix Mix Fund. The fund still represents our active allocation views, but of course the investment style and the instruments used within the portfolio have evolved over time.
How does Optimix’s investment approach differ from those of its rivals within the Dutch market?
Our investment team is less focused on benchmarks and relative thinking than most of our peers. The company’s mandates have wide asset allocation bandwidths, especially dedicated to de-risk portfolios. For instance, a neutral mandate where a 50 percent equity allocation is the standard benchmark allocation has the possibility to vary its equity exposure from 10 percent to 70 percent.
Over the last five years, the equity allocation has varied between 28 percent and 68 percent for such a mandate. The Optimix investment process and team is organised to act swiftly in today’s financial markets. Bond exposures hardly offer any value anymore, and the traditional buffer function of bonds is diminishing.
What is the main strength of the Handelsbanken/Optimix partnership?
Both organisations and the products offered complement each other. The same client base is targeted, of which most are high net worth individuals and entrepreneurs.
Neither Optimix nor Handelsbanken Netherlands offer services for the mass retail market. Local branches of Handelsbanken Netherlands will be able to offer the full suite of products to its local client base. Before the merger, both companies shared the same culture. This is based on client-led decision-making. Therefore, the stability of our relationship management team is very important.
Both companies want to create a strong and profitable business by focusing on higher client satisfaction than any competing companies. Each believes that satisfied clients create long-term relationships.
What makes Optimix’s approach to the Dutch market so distinctive?
The Handelsbanken/Optimix combination takes a new route in developing its business in the Netherlands. The industry in general is moving away from personal relationships – many companies are closing regional and local branches and are moving towards a service model solely focused on web-based services and applications.
In contrast, we are opening new offices across the Netherlands. We invest and add employees locally to drive our combined business forward. We believe that, due to our local presence, we are able to create a profitable business centred on our clients’ needs, and we aim to create a strong client community. We will support this expanding local strategy with state-of-the-art technology and web-based applications.
The year in which Optimix Vermogensbeheer was founded
The year Handelsbanken Netherlands acquired Optimix
How will Optimix cope with today’s financial market challenges of low and negative interest rates?
Years of intensive central bank intervention – ultimately via zero and negative interest rates – has resulted in diminished asset risks across the board. Markets have become a sideways affair with more frequent spikes in short-term volatility. Across such markets, relative returns have become more important and bigger in size, to generate performance.
We allow the weights of our portfolio assets to vary within large bandwidths. Our first objective for client portfolios is capital preservation and gradual growth. To deliver these results in today’s markets, we need to utilise large bandwidths and be able to hold large allocations in cash – and low allocations in equity – if we deem necessary. Benchmark-focused investments will not be able to fulfil the above objective. This, as far as we know, distinguishes us from other private wealth managers across the Netherlands.
What are the most important investment themes and strategies that Optimix is currently planning?
We believe that most investments can be identified by two to three major themes. It is our role to successfully find these themes and optimally position our clients, exposing them to a minimal amount of unavoidable risk, and still obtain as much of the returns from the investment themes as possible.
We believe that the interest cycle has turned and that bonds in general offer more risk than value. This will give us more challenges in relation to portfolio construction, but ultimately and in the longer term this will be a good thing. Emerging markets should deliver superior returns on equity and fixed income against their developed counterparts. A major driver behind this is our assessment that the commodity complex has bottomed, and crude oil prices should increase in the coming years. Emerging markets valuations are undemanding, and we expect a return of earnings growth after several years of declines.
In developed markets we explicitly play our commodity view via investments in natural resources equity, both in energy and metals mining companies. The recent multi-year bear market in commodity prices has led to severe underinvestment in both spaces, and has sown the seeds of new supply deficits over the coming years. Crude oil and metal prices need to rise and incentivise the development of new supply to meet future demand.