In April 2012, the UK pension fund giant, which is owned by the BT Pension Scheme and has £26.5bn under management, began marketing three of its Ucits funds to the retail investment market. As far as Clive Selman, director of business development, UK wholesale, is concerned, things have got off to a good start.
“It feels like you are building a startup without having all of the issues of building a startup, such as funding operational concerns [and] corporate governance issues. You have the flexibility of being able to build a team and put your stance on how it evolves. That is a rare opportunity.”
Mr Selman joined from Man Group, where he was part of the hedge fund sales team. In fact, the conversation about his career is rather short, as Man Group is his only previous employer.
“Initially, I spent three years in Switzerland [working for Man] supporting regional sales teams around the world,” he says. “I would be calling expat brokers in Tokyo, the Middle East, Europe and Latin America... about hedge funds and why they should think about them.
“I cut my teeth talking to advisers about hedge fund products, and it was a tough sell in 1999, when it was all about long-only equity investing. The change came in 2002, 2003 when people were looking for absolute return and diversification away from long-only,” he adds.
However, in October 2010, Man Group bought GLG, and Mr Selman was moved into the GLG side of the business, alongside long-only sales people including Richard Phillips, who, following the acquisition, was given responsibility for developing and implementing the business’ retail sales strategy in the UK.
“I was the only person who survived from the Man side in the retail funds business,” he says. “I was their hedge fund specialist, and it was eye-opening, especially as everyone was buying the fund we had there – the Japan fund – at the end of 2011. It made me realise that I really wanted a diversified product suite. It is better to have more things to sell than less in this environment.”
While he admits that 12 years at one firm made him hungry for a new challenge, it took him a while to find the right offer.
“Hermes came along, and the beauty of it was that you have a large equity capability, fixed income and all the alternatives, whether that is real estate, hedge fund, infrastructure, commodities – it is very diverse. It felt like a sensible and natural step to make. I wanted to focus more on being a UK specialist as well,” Mr Selman adds.
Part of the initial drive to get the Hermes funds into the retail space was to get them listed in the IMA sectors, which, to some suprise, gained the backing of Jupiter’s investment veteran John Chatfeild-Roberts.
At the end of April 2013, Mr Chatfeild-Roberts bought the Hermes US Small & Mid Cap Equity fund to add to the US equity portion of the £1.9bn Merlin Growth and £870m Merlin Worldwide funds.
It isn’t surprising, then, that it is with the US fund in particular that Mr Selman claims success – since the start of the year, the fund has attracted more than $350m (£226.7m) in third-party assets.
“That Ucits fund started with a cornerstone investment from the pension scheme of $100m in September last year, and at the start of this year there was only that investment. To date, it stands at $450m, [with] 20 external clients from the UK and Switzerland,” he says.
“The great thing is that there has been a number of clients coming in from a range of channels. That has been the best success thus far, and hopefully there is a lot more to come.”
Mr Selman’s inherited his enthusiasm for selling from his father, who was a salesman for the defence industry. This meant bringing up his family as expats in the Middle East.
“It looked very glamorous, as a child looking in – he was jetting off to all sorts of places,” he says. “I always wanted to be in sales, but I didn’t really know which area.”
At university, he studied business and German, two subjects he believed could take him in any direction.
“When it came to the end of my university days and everyone was looking for a job, I was planning on going travelling,” he recalls. “Admittedly, I got a bit freaked out by the fact everyone was looking for a job, and started to go to graduate sales recruitment places. They were all offering me jobs in telecoms and media because it was the late 1990s and the tech boom.”
But it was the offer from Man Group that really appealed. “I really was thinking about going travelling until I got the opportunity that suited what I wanted – the ability to travel, because it was based in Switzerland, and to use my languages, English, French and German,” Mr Selman admits.
“The job was to go and work at Man Group in their hedge fund division. I did the interviews while I was still at university and had a job lined up before I graduated. Three months after graduation, I was in Switzerland.
“I joined an industry that was still in its relative infancy, and it was a phenomenal ride. Certainly until the middle of 2008, it was an extraordinary place to work.”
Not one to shy away from a challenge, Mr Selman has taken his new role at Hermes by the horns, and is confident success will come if he and his team continue to plug away.
“I’m working a lot harder than I ever did previously, and it is just a function of it being exciting – and the ownership element of it,” smiles Mr Selman.
“We’ve done a lot of work in terms of ‘meet the manager’ lunches, a lot of events and getting the fund managers out there. The story is interesting, because we are quite new, but we are not a startup – there is £26bn of assets under management, the bulk of which is the pension scheme. We’ve got an interesting story and managers that have been around for a long time.”
He admits that, for the fund selectors he is contacting, the pitch is difficult, because they haven’t necessarily seen what the fund managers at Hermes are capable of.
“We are different, because we have a different time horizon through the way that our portfolio managers are running assets. Pension schemes have such a long-term investment horizon; they don’t think about next month or next quarter, it is about sustainable alpha, and with the active asset management business we are mandated to deliver alpha over the benchmark in the long term,” he says.
“With our US small- and mid-cap fund – which is the one that has seen the greatest interest and take up – it has really helped us to build the position and brand.”
Interestingly, in an industry of large players such as Schroders, BlackRock, First State and Aberdeen, it is the capacity constraints of some of the more popular funds that are allowing the funds at Hermes to gain traction.
“Generally, the places where we have seen interest are the places where the bigger, well-known names are soft closing or coming to capacity,” says Mr Selman. “Those have tended to be the US, Asia, Gems and Japan. That, aligned with performance and being new to the market, is a good combination.
“We are not sitting here saying we want to be the next XYZ, we are saying we want to take this business in sensible iterations for the next one, three and five years, raise assets across the book, bring in a lot of external clients and build ourselves into a fully functioning third-party asset management business. At the end of the day, we’ve got to be realistic.”
