Neptune’s ascent proves small can be beautiful

Paul Boughton was one of many refugees from Legg Mason after its merger with Citigroup’s asset management business added $400bn (€325bn) in assets. He seemed edgy and uncomfortable when the acquisition loomed in 2006, unwilling to rock the boat and unconvincing when talking about a fund range waiting to be redrawn.

Today, he once again oozes sophistication, slickness and confidence in a product range handled by Neptune, one of the industry’s true boutiques, employing an investment staff of 22. Neptune was created by investment dynamo Robin Geffen in 2002, moving on from a process set up at Scottish Equitable, but operating without insurance company baggage.

Bearing in mind Mr Geffen’s boutique was established and lived through an age where passive investment very much became the norm, the growth from £20m (€23m) to £5.7bn today is little short of phenomenal. Almost £4bn has been added during the last four years alone.

Despite the industry-focused top-down process, backed up with an economic overlay, there is much work done by Neptune managers on individual companies to compliment top-down sector research. The fund managers all sit at the same desk, with Mr Geffen, their boss, in the middle of all the activity. Ideas are constantly swapped, although there is a weekly formal gathering too. “The process allows them to use their own flair,” says Mr Boughton, the firm’s head of European distribution. “But because everything they do is risk-controlled, if they want to deviate from a position, they must do their best to justify it the investment committee.”

Neptune does pride itself on flexibility and ability to take advantage of market opportunities. Distributors and fund selectors must be warned, however, that 5 per cent off-benchmark bets are frequent, with non-conformist positions of between 15 and 20 per cent occasionally allowed. “If a manager likes IT, but can’t find good IT stocks in Europe, as there are not very many, they can potentially go off benchmark and buy up to 15 per cent in the US or Asia,” confirms Mr Boughton.

Despite its boutique nature, it would be a mistake to assume Neptune has a narrow product offering. Strategies, spread across 30 funds, include global equities, European equities, US stocks and fixed income. The global and European equity units each have more than £1bn invested.

Currently, Neptune’s global equity fund has a 45 per cent emerging markets weighting. Yet Mr Boughton admits this could be as much as 70 per cent if the investments which Western companies have in developing economies are taken into account.

Last year saw £500m in net sales from Continental Europe, with £1bn now being managed on behalf of clients on the Continent. But this money is currently held in UK Oeic funds, and Mr Boughton is aware that assets can rise even more sharply if an effective range of Luxembourg Ucits funds is created and marketed.

He also knows the value of getting onto an approved list and following that up with regular visits to the bank. “Last year, one Swiss bank gave us several thousand clients in just three days,” he says. Naturally, Swiss banks are one of the main targets of his distribution drive.

Germany, where smaller private banks such as Wegelin & Co. typically look for boutique players, is another frequent destination. Although he also visits the larger private banks, Mr Boughton seems reluctant to devote too many resources to that sector. “Sometimes, if you are on platforms for larger private banks, as a more niche player, you are less likely to get as many assets. The selectors might want boutiques, but their clients want to keep buying the big brands they know. I would rather be out of that game. I want high quality assets and to work with a bank that sticks with us.”

The family office space is however a higher priority. And in order to target these semi-institutions and the smaller wealth managers of Europe, Neptune has joined forces with fellow boutiques Thames River Capital, Martin Currie and First State for an Alpha Generators roadshow, calling in at Munich, Geneva, Frankfurt and Zurich.

The trend advocated by many large houses such as Goldman Sachs and Credit Suisse of sharing asset allocations with distributors does not find favour at Neptune. “Our information is proprietary and our managers are quite protective over their research,” says Mr Boughton.

Paul Boughton, Neptune