New kids challenge old way of thinking

Several groups are using different blueprints to build their portfolio management businesses. RWC Partners, brainchild of refugees from the asset management arms of Deutsche Bank and JP Morgan, has recently been making waves by capturing top equity income talent from Schroders.

For a relatively unknown, new kid on the block to raid the fund management citadel of London’s Gresham Street, where some of Europe’s finest fund managers are gathered, certainly took some audacity. Schroders itself was so impressed by RWC’s guile that it has since taken a 49 per cent stake in the boutique, which runs $2.5bn (€2bn).

Helping boost asset management capacity is one thing, but RWC’s stunt has done more than any potential advertising campaign could do to increase their brand’s recognition amongst Europe’s leading fund selectors.

Stage-managed by the urbane partnership of chief executive Peter Harrison and business development boss Dan Mannix, the RWC grab has added capacity in what is currently one of the most desirable asset classes among private banks and distributors.

But these chaps are too long in the tooth to think assets will simply flow in due to performance records and personnel. They spotted at a very early stage the importance of Ucits III legislation in giving regulatory comfort to private clients. They also made sure their products were user friendly, ready to roll in key markets and available in currencies required by customers.

If you want to start an asset management company with a blank sheet of paper, argues Mr Mannix, make sure you can give private banks and discretionary wealth managers the structures they want, with a choice of both long-only and hedge-style products. Establishing offices in swanky central London rather than the stuffier City also seems to have been part of the plan.

But others have gone further. Integral Asset Management is an unlikely, newly formed investment house. There are no offices and no products. The investment process is masterminded by Nick Dewhirst. He spends his time allocating assets between various exchange traded funds. He looks from head to toe like a City stockbroker from pre-Big Bang days, and indeed has worked for most of London’s old school, share-pushing houses.

But Mr Dewhirst has switched from choosing stocks to choosing markets, and his portfolios are a lot more successful as a result. Integral’s philosophy is all about active management of passive funds, and back-tested, holds up well. True, it does marginally worse than other houses in bad years, but when markets are good, returns can be double the competion.

The process is not guaranteed to work every year. Neither RWC or Integral offer a panacea for investment management in terms of structure or investment philosophy. What they have done, however, is to raise the stakes in new modes of competition to the old style houses, whose way of doing business is increasingly under threat.