By the time Elizabeth Savage joined Rathbone Investment Management in 2005, she had already cut her teeth in the hedge fund industry at a boutique investment manager.
The boutique in question was Progressive Alternative Investments, where Ms Savage came to recognise the benefits of starting out at a small investment house.
“I gained a grounding in all areas of working for an investment manager, including the operational side, due diligence, as well as meeting the managers. I was quite privileged, because I think someone in such a junior role at a larger house wouldn’t have had the opportunity to meet high-profile investment managers at that stage of their career,” she says.
The hedge fund industry at that time was nascent but growing. “The traditional asset management world was struggling because it was a bear market, effectively. So hedge funds came into fashion, really, and more investors were demanding access to hedge funds,” she notes.
“The listed hedge funds space grew up around that backdrop and our firm was one of the first to launch a listed fund of hedge funds.”
Meanwhile, Rathbones had what she describes as an “increased appetite” to invest in alternatives such as hedge funds, prompting her to move to the firm.
Today she holds the position of head of research at Rathbones, where she has been charged with formalising its research capability.
Acting on what she calls her “inquisitive” nature, she was drawn to investment management straight from university. More recently, she took on her role at Rathbones because she saw an opportunity to build a credible research team with the backing of a large organisation.
“There was a research capability but it was carried out by our investment managers. And our investment managers are still very much involved in the process,” says Ms Savage.
“I think that is a real strength that we have here. So, building out that level of collaboration is another goal of mine.”
Having accepted the head of research role in March this year, there is clearly much that Ms Savage wants to achieve. “The objective really is to build on what we’ve already started,” she explains. “So it’s fortifying what we’ve achieved in terms of the rigour of the analysis and the coverage that we carry out of the investment universe.”
The aim is to select what she refers to as “best of breed” investments for everyone. “We have a range of clients, from charities and smaller private clients via IFAs, to more traditional private client profiles. And they can range in size as well, so you might have ultra-high net worth right down to smaller clients,” she observes.
“We need to come up with a selection of investments that will form part of a portfolio for that range of clients.”
While that might seem a rather obvious objective, Ms Savage suggests that the challenge lies in having an edge over the company’s rivals.
At this point, she elaborates. “It’s being able to demonstrate that you can generate alpha and generate higher returns with commensurate risk compared to other opportunities out there for clients,” she says.
“Actually, the service we provide is to ensure that the portfolios we construct meet the clients’ objectives. They all have differing time horizons, they all have different levels of risk tolerance and return objectives.
“And the strength of Rathbones is we construct bespoke portfolios for clients, we don’t pigeonhole them or put them into models, we really do try to meet their needs.”
Talking about risk, Ms Savage is reminded of her industry bugbear, which is the emphasis on outperformance and past performance. This is also where her hedge fund industry credentials come into play.
“My hedge fund background means I’m very risk-aware, so I know what can go wrong. Some might argue that I’m a pessimist,” she admits. “But I think if you’re satisfied with your downside – or understand the types of scenarios in which that can occur – and you’re still happy that the upside is commensurate with that, then that’s a much more comfortable place to come from when you’re making an investment.
“I think that’s definitely the way we should be looking at risk in investment rather than [saying]: ‘That sounds like an exciting story, I hope it will go OK,’ without even thinking about the risks.”
She believes that historically, the industry has focused on the wrong things. “We sell funds based on what’s been achieved in the past or things that aren’t even achievable,” she adds.
Having said that, she is confident that the industry is changing. What is more, she thinks that it has to.
“The market environment has been quite favourable, but markets look fair value, the bond market has to turn at some point and I think when that capitulation comes, there will be a few people having nasty surprises. And we want to protect ourselves from that, be prudent and understand the risks we’re taking,” she says.
She acknowledges that the industry is going through a period of transformation at the moment. Some of this is being driven by regulation, such as the Retail Distribution Review (RDR), and the rest of it is more cyclical.
“There’s a lot of consolidation in the industry, both among the asset managers and investors in funds,” Ms Savage explains. “Obviously there’s a drive towards greater transparency on fees and other elements. I think that will enable people like me to add more value in terms of the analysis we can do.
“You might see more concentrated fund buying, potentially, because of consolidation in the asset management industry. Or you might see a proliferation of boutiques, as the investment managers within those larger groups dislike the dynamics and perhaps want to go off on their own and set up something that’s more in line with their objectives,” she says.
“So I think it’s really exciting, actually, because you’re seeing a lot of change and that means there’ll be opportunities.”
Ms Savage combines her role as head of research with that of assistant manager on the Rathbone Strategic Growth fund and the Rathbone Total Return fund, working closely with head of multi-asset investments David Coombs.
Fortunately, there is time left over during her working week to indulge her love of art – she is currently taking an oil-painting course – and her passion for cycling. Recently she completed her longest bike ride to date, pedalling from London to Paris for charity.
Her other hobby is travelling, although it is difficult not to think about investments while she is on the road. “While you do try to switch off, it just does come naturally – you see opportunities. It makes you think in quite an entrepreneurial way,” she comments.
Last year Ms Savage established an investment conference at Rathbones, focusing first on Asia. This year, the conference theme was the rather more generic subject of disruptive technologies, but the concept behind her conference model remains the same.
“We had people from industry and from companies that we invest in. And that’s what I want to build on; building a broader network of specialists who can give us interesting and different insights into the dynamics that will shape industries into which we might invest.”
She concludes: “I have been given a blank sheet to build something that is the best in the industry, ultimately, and I have to think what that looks like.
“And that’s one of the things that I think can help give us an edge over our competitors.”
CV
March 2014-present – Head of research, Rathbone Investment Management
2011-present – Assistant manager, Rathbone Strategic Growth fund and Rathbone Total Return fund
2005-2014 – Alternative investment analyst, Rathbone Investment Management
2002-2005 – Graduate trainee then hedge fund analyst, Progressive Alternative Investments
