Signia Wealth adds a touch of spice to investing

“You get to a stage in your life when you look for a new challenge,” states Rupert Robinson in his calm and confident voice, holding court in the West London offices of Signia Wealth, the boutique whose business he was called to manage at the beginning of this year by founder and chief executive Nathalie Dauriac-Stoebe.

The driving force behind the growth of Schroders Private Banking, where assets doubled to £9bn (€10.5bn) under his leadership between 2008 and 2012, Mr Robinson seems determined to make the best of his 25-year plus career in private banking and wealth management. His target once more is to at least double the firm’s £2.2bn total assets – gathered since it was founded in 2010 – to “north of £5bn” over the next five years.

“I was keen to get re-engaged with a smaller outfit that I could really influence with my experience and know-how, and be able to mould and shape its proposition in a way I believe is more reflective of what ultra high net worth clients want,” he says. 

Today’s UHNWs yearn to take a more direct route, both in public and private markets, and particularly in alternative asset classes, such as real estate, private equity and infrastructure.

“But the wealth management industry has been somewhat guilty of taking the excitement out of investment,” he says, “as everything has moved towards pooled investments, where investors own units and shares in vehicles, depriving them from that involvement or inclusion they aspire to.”

In the retail and commercial real estate space, where banks typically offer clients access through funds or funds of funds, Signia prides itself in providing direct access, mainly through club investments. “Our client base wants to invest in buildings,” he says, explaining that half of them are resident non-domiciled and international.

Last year, the firm pulled together a collection of clients to invest in a three-year property development project in Mayfair, London, expected to deliver an average annual return of around 24 per cent over those three years, with a reasonably conservative exit price per square foot factored in,  says Mr Robinson. In the pipeline there is another property development project on a much bigger scale.

Over the past couple of years, Signia has invested more than £300m into private equity transactions, through a mix of direct deals and niche funds “having shorter investment periods and quicker return of cash,” including secondary and credit funds. In the credit space, opportunities were found with a manager seeking to capitalise on the dislocation in the European banking system, where investors would lend money to SMEs with good business models, “clip a nice coupon and get some equity participation”.

The advisory board of the firm, including entrepreneur businessmen such as John Caudwell, Jon Moulton, Mike Balfour or Steven Vernon, and the global network of clients, mainly entrepreneurs, ensures “a huge access to deal flow” both in the public, private and real estate markets, claims Mr Robinson.

Infrastructure is going to be one of the fastest growing areas for future flows of investment, he believes. At the moment the space is very much dominated by institutional investors, but its inflation-linked element, stable and consistent returns, and the cash flow yields it provides, characteristics also shared by real estate, make this asset segment well suited to private client investments, he says. In this area, Signia works with Greensphere Capital, a London-based specialist investment firm focused on sustainable energy and infrastructure.

The key target is to further develop in-house capability, be it due diligence capability or capability to invest directly, across a range of different classes. “Where we don’t have the skillset, but we believe passionately about the growth opportunity, then we try and find specialists we can partner with.”

Building strategic partnerships with investment specialists in a sub-advisory fashion is one of the options. “We would be looking to create more managed accounts that are sub-advised to an investment specialist,” he says. Sub-advisory deals may be done in the infrastructure and the private equity space, particularly in niche areas, and possibly in real estate.

Off-the-shelf funds are used in specialist areas of fixed income, such as high yield, emerging market or distressed debt, as well as leveraged loans, but for large portfolios managed accounts would be contemplated.

Direct deals, however, represent a large percentage of investments at the firm, in particularly in the equity space, and in sovereign or investment grade bonds. “Direct investments enable us to manage and control the TER of the portfolio, which is important in this climate. With interest rates so low, people have got very sensitive about layer on layer of fees,” he says.

High quality investment, content and opportunities must be offered at Signia clients, first and foremost, but the firm also needs to “develop the ability to attract investors from other wealth management businesses”.

Today, Signia works already very closely with other family offices in private equity deals. “We share information, experiences and deal flow, as often deals are of such a size that we can’t possibly do them all on our own, with our clients only.”

Growth plans

To drive the growth of the company, it is really important to understand its DNA and to make sure all pillars and foundations are sound. “With less than 40 people in the firm, we are not looking to conquer the world overnight but I think we will undoubtedly bring in more investment talent and experienced client advisers.”

Mr Robinson anticipates the firm will look at small bolt on acquisitions too. “And if individuals or teams of individuals come on the market, sharing the same vision and values and want to move into a more entrepreneurial environment, then we will be happy to talk to them.” He probably hopes to replicate the coup he made at Schroders with the recruitment of the Merrill team in 2010, which is believed to have brought £1bn to the bank.

Offering bespoke solutions appears to be one of Mr Robinson’s key priorities. But, depending on the number and types of clients, the amount of assets where for a firm starts “to get much harder to offer a bespoke offering” is somewhere £5bn and £10bn, he estimates.

Banks, in particular, have a greater requirement for commoditising their offering and packaging it in a way that can be delivered across a wide range of clients, which enables them to levy a fee, he states.

“If we are successful in the UHNW space, I think we can grow our business nearer £10bn and still be reasonably bespoke. When you get beyond that, it is very tough. I think the challenge for the business is then to create specialist content that can be delivered to client and build efficiencies and economies of scale.”

Good IT systems are critical, especially for direct investments, as are portfolio management, risk management systems as well as client reporting, and there is still work to do on that front, he acknowledges.

Increased regulation also may provide opportunity for smaller firms, he states. “There is a danger that the level of regulation, and the intensity around it, is forcing many business models to offer standardised and commodity offerings. This is undoubtedly going to constrain the proposition that certain businesses are willing to offer clients.”

That provides opportunity for smaller, more adaptable organisations to be more creative, because of their size and their ability to offer investment solutions on a more bespoke basis, on a smaller scale. “The bigger you are, the greater the regulatory cost,” he argues.

But that does not mean smaller business can slip through the net. “Governments are broke, the fiscal position is very serious and frankly the days of bank secrecy and the days of firms managing non-declared money are over. People should be very fearful if they continue to be engaged in that sort of activity and they would be naïve to think if they are small they can slip through the net.”

As changes continue to fiscal and legislative regimes around the world, efficient wealth structuring will become even more critical to the management of client money. But that means playing within the rules and in the spirit of legislation.

“Even though you may think you have exploited a loophole, if what you are doing is not in the spirit of legislation, then increasingly you are going to come under fire,” adds Mr Robinson.