Switzerland's Union Bancaire Privée has been working over the past two years with Australia-based Bell Asset Management to deliver specialist investment skills. We talk to both firms about how the past two dramatic years have worked out.

This news service recently interviewed Olivier Marion, head of business development at UBP Australia (part of Union Bancaire Privée); Rob Sullivan, head of strategy and distribution at Bell Asset Management, and Ned Bell, chief investment officer and portfolio manager at BAM. The Swiss and Australian firms have been working together to deliver specialist investment offerings over the past two years – a tumultuous time in global markets, to put it mildly. And conditions haven’t eased.

How has the partnership worked out? 
Marion, Sullivan and Bell: The goal of this mutually beneficial strategic partnership is to simultaneously build Union Bancaire Privée’s presence in the Australian institutional market while seeing Bell Asset Management (“Bell”) grow assets in Europe, the Middle East and Asia.

Over the past two years, UBP has been able to leverage Bell’s network to present its investment capabilities to a wide range of local institutions and consultants, with some of them undertaking a review of UBP’s credit strategies.

During that same period, Bell has been able to leverage UBP’s distribution capabilities to grow its asset base and gain new clients seeking to allocate to a well-regarded boutique specialised in small- and mid-cap and all-cap equities.        

In judging how this partnership works out, what is “success” looking like for you (returns, inflows, recommendations by clients and third parties, other metrics)?
Marion, Sullivan and Bell: Success of the partnership will be viewed through the prism of the inbound (UBP’s presence in Australia) and outbound (Bell’s presence in UBP’s key markets). Asset growth is the ultimate measure of success for the partnership, closely followed by our collective ability to build pipelines and enhance our standing with key asset consultants.  

Bell has an important wealth management partner now – what has been the success so far in reaching further into the wealth management market that Bell has had? What sort of business is it getting from high net worth individuals?
Marion, Sullivan and Bell: Thanks to this partnership, Bell has been able to diversify its investor base by reaching out to a large number of UBP’s high net worth clients. This type of clients might require specific fund structures or bespoke solutions, which UBP is able to offer through its platform.     

What is the best way to describe what sort of manager Bell AM is? What is its core focus?
Marion, Sullivan and Bell: Bell is a family-owned boutique specialised in global equities, with an institutional client bias and servicing. 

To Ned Bell: What is your firm’s investment philosophy? Is it one based around areas such as risk management, specific stock selection, thematics, other?
Bell: We describe our services as “Quality at a Reasonable Price” – which essentially means that we aim to simultaneously mitigate the two most important risks with equity investing – fundamental risk (by only investing in quality names), and valuation risk (by being patient on the way into names and disciplined on the way out). 

Are you a contrarian investor? Given the severe drawdowns in some markets at the moment, what sort of broad asset allocation stance do you take during periods such as this?
Bell: We are contrarian in that we love buying quality names when they are out of favour and undervalued. Our material overweight in SMID cap names in our all-cap strategies typifies this mind-set. While many investors would regard SMID cap names as being overly risky at this point in the cycle, we would argue that when the asset class trades on a fwd P/E of 14.5x, it’s pricing in plenty of risk. 

What sort of idea collaboration on investment do you engage in with UBP, which as you know has strengths in areas such as alternatives, etc.?
Bell: Until now, we have built a strong rapport with the UBP ESG team in Europe, which we expect will evolve in time.  

You are an active investment house. Do you think the whole term “passive” needs to be changed because ultimately all investments require some sort of decision?
Bell: Yes – I think passive investing comes with flaws that collectively overwhelm the attractiveness of the cost benefits, one of the biggest flaws being that you are essentially giving up your ability to protect capital when markets decline like they have this year. 

How large is Bell in terms of AuM, team, etc.? 
Bell: Our total equity AuM was $2.3 billion as at 31 July, while our investment team consists of nine individuals. 

Do you have specific holdings that you give as examples for illustrating your investment playbook?
Bell: The beauty of our investment approach and the way we define quality is that we invest in a broad church of quality companies that are generally quite lowly correlated to each other. 

More specifically, we own some “traditional quality” names like Church & Dwight, which has proven to be very resilient, “growth” names like Tractor Supply who have grown revenue by 13 per cent annually and earnings by 21 per cent annually over the last five years, as well as “undervalued” names like AmerisourceBergen which is trading on a P/E of 13x and FCF [free cash flow] yield of 6.5 per cent. Our ability to shift capital between these characteristics and companies is a material advantage. 

We think the current market environment – dictated by high inflation, rising interest rates and a softening macro backdrop – will be very positive for investing in such quality names. Companies with pricing power, high levels of return on capital and modest leverage should perform very well in relative terms.