This news service recently interviewed Stamford Associates, a UK-based firm analysing and tracking performance and risks of investment funds on behalf of clients such as wealth managers.
Wealth managers seeking best-in-class portfolio managers have a well-founded worry that some of the sharpest minds are not on their radar. Not all of the strongest-performing portfolio managers are in the public domain - they won't necessarily be featured in magazine profiles, be ranked by the large research houses, and be interviewed on the TV. Getting in touch with the unappreciated "diamonds" of portfolio management is a task that some firms are therefore willing to pay for. A firm operating in this space of finding under-appreciated talent is Stamford Associates, a business originally created in 1984 and which has expanded beyond its original client base to be a firm serving wealth management. It works closely with organisations such as St James's Place, for example. This publication recently spoke to Guy Beech, Stamford's head of business development.
Please tell us about yourself.
I spent 11 years at Henderson finishing as international sales director. I then joined Threadneedle as a founder member and built up and ran the UK funds franchise as well as participating in the institutional and hedge fund businesses. I also served on the board of Cofunds. I ran an advisory business for a number of years but in 2014 was introduced to Nathan Gelber, Stamford’s founder. Given regulatory trends I saw a bright future for Stamford’s services and this coincided with Nathan wanting someone to expand the business.
There is an issue in how many of the strongest fund managers are “off the grid” because their funds are not public, either listed or otherwise easy for investors to track down. How significant a portion of the asset management market is below the radar?
It is not statistically significant by number of organisations or assets under management, but is very meaningful in terms of the proportion of truly talented managers available. For example within the St. James’s place platform 30 per cent of the managers and portfolios recommended by Stamford are not otherwise accessible in the UK.
How do you find such obscure or unknown fund managers? How do you use technology and other routes to find these people?
Over the past 30 years we have built up an extensive network of likeminded investors and service providers who are useful sources of intelligence. Coupled with our proprietary search technology this gives us a unique edge over standard manager research approaches.
What do think has prevented wealth managers from accessing best-of-breed investment professionals in the past? Lack of knowledge tools, inertia, costs, cult of the “star manager”, or other?
Wealth managers who pick funds by definition restrict themselves to funds registered for sale in their own jurisdiction. For European wealth managers this is highly restrictive as many of the world's most talented managers are outside Europe and do not offer UCITS vehicles. That is why we work with wealth managers on a white label fund and segregated account basis so client money can be allocated to this talent pool.
Researching managers and auditing and checking their investment processes obviously takes up a lot of time and resource. What sort of spending does this involve? Without naming specific figures, does Stamford’s cost base run to millions, tens of millions?
We have designed our proprietary systems over the past 30 years and the approach is scalable. Despite an extensive manager database we don’t provide general market coverage and only fish in the top 10 per cent of managers. We also only go to market for new managers when we have a mandate as information rapidly dates. So we don’t have a multibillion cost base. For us it is about knowing what to look for at outset and applying our in-depth research to a few well-chosen candidates.
What is your charging structure? Do you charge on a bespoke/fixed basis? How do you calculate what you charge clients?
We charge an ongoing basis points fee on assets under advice. The actual level will be driven by the complexity of the requirements.
What sort of trends do you see in terms of the type of people asking for your services?
In general terms regulation is driving behaviour. For us this means speaking to wealth managers about MiFID II and helping them create superior investment products that access truly talented managers not available to their peers. More recently we have seen interests regarding insurance companies restructuring their investment portfolios under Solvency II.
How big a factor, in your view, are tests for investment suitability (impact of regulators, etc.) playing in the need by clients to have rigorous analysis of their processes? Do you find that suitability is a selling factor for you? Yes very much so. With MiFID II around the corner, transparency, suitability and reporting are all reasons to talk to Stamford.