Mr Coombe joined BT in 1991 and became chief executive in 2005, following the group’s sale to Westpac. He left the group in November 2011.
In a ‘Fireside Chat’ session at the Morningstar Investment Conference in Sydney yesterday, Morningstar Asia Pacific managing director for research strategy, Anthony Serhan, asked Mr Coombe about the “challenges” BT faced towards the end of the 1990s.
“That whole collapse [in funds under management] coincided with four different owners, and that’s very disruptive for a money management business,” said Mr Coombe.
BT’s original owner, Banker’s Trust, sold the group to Deutsche Bank in the late 1990s. US-based Principal Financial Group then took control of BT, only to sell it to Westpac in 2002.
“We took our eye off the ball as well and delivered some pretty ordinary returns during that period of time,” Mr Coombe conceded.
“If you put those two together, it’s the perfect storm.”
Asked about the things he could control during the period – namely, the investment decisions – Mr Coombe was quick to point out BT delivered “great returns for many years” in the early 1990s.
“We may not have been overly transparent about what we did, but what we did delivered results,” he said.
However, the group began to change its processes “quite substantially” to “suit the requirements of the research houses” in the late 1990s, Mr Coombe said.
“It cut against the philosophy and grain of the people that were managing money and it ultimately resulted in some fairly poor performance,” he admitted.
“I’m not blaming the research houses – we decided that this was the game [to play].”
During the early 1990s, BT would have received the FUM regardless of whether its funds were rated, he said.
“Then the whole research industry started to buy in towards the late ‘90s and we started to tailor the way we managed money to get the ‘tick’,” Mr Coombe said.
“That was a bad thing – we should have stuck to our knitting.”
Mr Serhan also asked Mr Coombe about the ill-fated BT Time fund (now know as the BT Technology Fund) which was launched at the height of the technology bubble in 2000.
Mr Coombe said he took “full responsibility” for the launch of the fund at the time, adding that it was the “wrong decision”.
“We had always avoided launching funds that were cyclical – we believed in product integrity – that is, products that would have relevance throughout cycles and wouldn’t end up… creating pain for investors,” he said.
“Clearly [the Time Fund] cut against that philosophy.”
But the launch of the fund was also down to the growing influence of the sales and marketing side of the BT business at the time, he added.
“I’m not saying that the money managers didn’t want to launch this fund – they clearly did. But it was being driven by the sales and marketing side of the business and I think that reflected a bit of a cultural change that was happening in BT at that time,” Mr Coombe said.
“It coincided with changing investment [processes]. The way we invested was more in line with what the research houses wanted.
“[Launching the fund was a] mistake. But having said that, we had been resisting launching it for one or two years and then we capitulated,” said Mr Coombe.
“The day we capitulated and launched it was the peak of the tech boom – the exact day.”
Mr Coombe described the Time Fund as “horrific” because BT saw a large amount of flows into it immediately.
“We took maybe four to five hundred million dollars in a two to three-month period,” he said.
