Tell Talks

Lauri Vaittinen: “You can’t say that consolidation of the asset management industry is a no-brainer”

Lauri Vaittinen, head of newly created Mandatum Asset Management, talks about the establishment of the new branch of Mandatum and why the increasing consolidation of the asset management industry is a rather multifaceted issue.

Despite the challenges brought on by the global pandemic and the consequent drop in M&A activity all over the Nordics, the Finnish insurance and banking groups Mandatum and Sampo have forged ahead to join forces in a new venture that has caused major changes to Mandatum Life’s corporate structure.

The two players announced in February that they will combine forces to form a new asset management business operating under the parent company Mandatum Holding, alongside Mandatum Life that handles personal insurance, reward solutions, pension insurance and private wealth management.

The new Mandatum Asset Management, which focuses on institutional investors and high net worth individuals, will combine Sampo Group’s asset management operations with those of Mandatum.

Lauri Vaittinen, the new CEO of Mandatum Asset Management, says combining forces with Sampo Group’s asset management has been long time in the making. “It seems this did not come as a surprise to our customers either as we’ve been steadily welding our asset management operations together over the past five years,” he says.

The gradual merger over the past few years has included the transfer of leveraged finance and growth equity teams under Mandatum along with the creation of a joint venture on the private debt and the real estate side.

With the new asset management arm, Mandatum has also seen some changes to its executive line-up. The long-term CEO of Mandatum Life Petri Niemisvirta has taken over as CEO of Mandatum Group, while Sampo’s chief investment officer Patrick Lapveteläinen has taken on the role of chairman of the board. Petri Niemisvirta also continues as Mandatum Life’s CEO. Lauri Vaittinen, who used to be the senior vice president of investment solutions at Mandatum Life, has taken charge of Mandatum Asset Management and Ville Talasmäki, ex-head of allocation at Sampo, leads the investment departments as its chief investment officer.

Lauri Vaittinen says he is looking forward to steering the new asset manager forward in the challenging environment where competition is growing as the industry matures. He says the growing competition presents its own challenges to local managers. “There has been a steady price erosion in more traditional products and I believe that competition will become fiercer, especially in alternatives. There are no low hanging fruits anymore and managers need that competitive edge to stay in the game," he notes.

When asked how the team handled the often time-consuming merger negotiations and planning, Lauri Vaittinen says the pandemic actually helped in the process. “As everyone’s calendars are void of client meetings, it has left more time for planning and made it easier to get everyone to sit down at the same table – or more accurately: Teams meeting. It has actually been easier to do the process online in the current situation than it would have been pre-pandemic,” he says.

In addition to running its in-house strategies, the team at Mandatum Asset Management also does fund selection and fund of funds for its customers that now include a growing German fraction as well. Lauri Vaittinen says that although growing the business is very much at the forefront of the new team’s strategy, it will not compromise on focus. “We won’t become a fund supermarket but will stick to what we know,” he says. The new asset management house currently runs a EUR 15 billion credit portfolio which Lauri Vaittinen says it will aim to grow aggressively over the coming years. “Credit and especially leveraged finance is something we have a wealth of know-how in and we want to become the front runner in that,” he says.

At the start of the pandemic, in March 2020, Mandatum’s investment team launched Mandatum Opportunistic Loan Strategy, a secondary loans strategy that was able to take advantage of the cheap market pricings and has ended up returning 31 per cent IRR over the year. Lauri Vaittinen says the team has also been growing its corporate credit portfolio substantially over the year.

On the equity front the asset manager also runs one of the largest growth equity strategies in Finland, Mandatum Private Equity that currently holds some EUR 160 million in assets. “Our advantage is that we have a strong knowledge on the bigger picture here in the Nordics,” Lauri Vaittinen explains.

He says that being a local manager enables the team to develop and run strategies that the larger, more global investment managers don’t have in their offering. However, he says that with the increased competition in the market, it often takes economies of scale to run more global strategies, which means that joining forces with competitors to gain that critical mass might be the only way ahead for some.

“You can’t say that consolidation of the asset management industry is a no-brainer, because it’s not. It’s by no means black and white but should instead be looked at case by case,” Lauri Vaittinen notes. He adds that in some cases, it might actually be more beneficial to concentrate on running more niche strategies.

“A good example of this is the EQT/Bridgepoint deal,” he says, referring to the deal between the Swedish private markets firm EQT and the UK alternative asset manager Bridgepoint that was completed at the end of last year. The deal saw EQT to sell off its EUR 4 billion credit business to Bridgepoint and consequently resulted in the UK manager growing its presence in the Nordics, Germany and the US. “EQT wanted to concentrate on its private equity business and its growth has been exponential after it sold off its credit business,” Lauri Vaittinen says. “It’s an example of if you do your thing well, you don’t need to consolidate but to diversify.”

Mandatum Asset Management’s new investment team will move into larger office at Bulevardi 56 at the end of the summer when Lauri Vaittinen hopes it will be safe for the team to return to the office. However, he notes that unlike some larger players in the industry that have drafted rather rigid plans to force their employees back to the office as soon as possible, the new Mandatum team will spend the first few months at the office getting to know each other and developing the necessary processes to get the operations running smoothly. After that, it will adopt more flexible working arrangements.

“I think flexibility is here to stay. It has been shown now that most things can be handled in a more flexible working environment that allows for a better quality of life for everyone in the team. Although there still are some aspects that are better done face to face, such as brainstorming, there needs to be a proper work/life balance as well. I don’t think it would be very smart to start drawing very dramatic lines in regards of that,” he says.

Personally, Lauri Vaittinen has seen his role change almost completely over the past decade. He has moved from being a portfolio manager at Pohjola Bank to chief securities officer at the Finnish pension company Etera, which merged with Ilmarinen in 2018, to CEO of Mandatum Asset Management. Now he looks back at his days as part of an investment team with some nostalgia. “Although I still work in finance, my job today is completely different from what it was ten years ago," he says. "Our field is actually a bit different in the sense that we don’t study to be managers of people – we study to become managers of money. Ten years ago, I used to think investments and investing on a daily basis, while now the focus has shifted to managing people and teams. That is actually something that we don’t talk much about in finance – managing people and teams. Everything is very much about portfolio management and managers. One of the biggest challenges for me has been to grow and evolve to be a good leader. That has been an interesting journey so far."