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Portfolio > Economy & Markets > Fixed Income

Recessions 'Not Always a Bad Thing': Carillon Tower President

By Jeff Berman

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As Carillon Tower Advisers continues to grow and expand its investment capabilities, the asset management firm reported that its assets under management and advisement (AUM/A) grew to about $67 billion in the second quarter of 2019.

That was up from $64.6 billion as of Jan. 31 and about $60 billion in April 2017, according to the St. Petersburg, Florida-based subsidiary of Raymond James Financial.

The total includes the five partners in asset management it has an ownership stake in, including the two firms it bought in November 2017: Equity asset manager Scout Investments in Kansas City, Missouri, and its Reams Asset Management fixed income specialist division in Columbus, Indiana, which had a combined $27 billion in AUM/A. The other partners Carillon has an ownership stake in are ClariVest Asset Management in San Diego, Cougar Global Investments in Toronto and Eagle Asset Management in St. Petersburg, Florida.

Carillon is continuing to look for new potential affiliates, Cooper Abbott, its president and chairman, told ThinkAdvisor. The firm is “definitely excited about the opportunity to partner with high-quality asset managers in the current environment,” he said. But he didn’t say if it had any potential targets in mind or whether it was in talks with any specific ones.

As for the current environment that Carillon and other firms in the sector are operating in now, Abbott said the market volatility we’ve seen this year presents challenges and opportunities. He also made a prediction: “I can guarantee you there’ll be a recession. I just can’t tell you when. You can plan the picnic, but not the weather.”

But he said: “Recessions are not always a bad thing. They can be pauses that refresh. They can be a chance to make sure that some of the excesses are worked out of the system. And … not all recessions are 2008, and I think that there’s actually a lot of money to be made in this kind of environment, particularly if you,” like his firm, are dealing with portfolios that are “based upon higher quality companies [and] higher quality securities — [ones that] can actually give you very good returns through a down market and also” can leave clients “very well-positioned to perform coming out of” the downturn.

Amid the market volatility, “there’s been some real questions around fixed income,” which he pointed out represent “a big part of most” individual investors’ allocations. “There’s been a lot of changes about assumptions related to fixed income just in the past 12 months,” he noted, recalling that “if we go back six months or nine months ago, everyone ‘knew’ the rates were going up.” As a result of that thinking, “many people were positioning fixed income portfolios in that regard,” he said, adding that, as it turned out “now everyone ‘knows’ the rates are going down.” That shift happened in a “pretty short period of time” and it remains to be seen “what ultimately happens,” he said.

Currently, he told ThinkAdvisor, “one of the things we are seeing an increased allocation to for the high-net-worth individuals, as well as on the institutional side, is to move to more of an unconstrained approach towards fixed income — more of a tactical approach giving more leeway to the manager so that they can implement their ideas as to where the opportunities are,” based on whether there’s “going to be a tightening or a loosening rate cycle.”

Because “fixed income is such a conundrum now,” he said: “This is a moment where individual investors really need a lot of advice. They can benefit from the guidance that a financial advisor can bring, the perspective that they can bring [in] reminding them what their ultimate goals are.”

Another trend that Abbott told us he’s seeing is growing interest in environmental, social and governance (ESG) investment. In Europe, ESG has “been an important consideration probably for the past decade,” but it took longer to gain traction in the U.S., he said. Now, however, the discussion around ESG is “pretty high” in the U.S. and Canada, he said. While an “asset move around it has not necessarily happened yet,” he said: “I think that is likely to be part of [the] equation going forward,” which is good for a firm like Carillon because, with ESG, “active managers have a huge advantage,” he said.

Abbott predicted interest in ESG will continue to grow in North America. But he said: “At some point, ideally, it gets to the point that you’re not talking about ESG investing — you’re just talking about investing because a lot of these concepts will be so built in to what it is to be a good company…a good stakeholder in a community…. [and] I’m hopeful that will happen.”

In the meantime, he warned, “there could be a little bit of a bandwagon effect” when dealing with ESG that investors should be aware of. For some advisors, it’s probably “just ticking a box” and not thinking through the complexity of it and what it means, he said.

— Check out Raymond James Wraps Up $172M Deal on ThinkAdvisor.

Jeff Berman

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