Mr Lang notes: “When I was younger, I hated people telling me it was all about experience. But how having done the same thing for a long time, I think experience is important. You don’t do something for a long time unless you really enjoy it and are doing it for the right reasons.”
Mr Pattisson adds: “When I left university, I probably knew 20 people who came into the City. Now I only know one who is still here. The vast majority quickly realised they had made a mistake.”
Unsurprisingly, having a behavioural psychology element to their fund management style, Mr Lang describes his career in fund management is an “interesting endeavour”.
“You’ve got to be a relentless decision maker, where you wake up in the morning, look at the wreckage of things you’ve done, work out what has passably got a chance of being right and what in hindsight was not a smart thing to do, and cut it.”
Both managers describe the job as “relentless”, which requires a certain emotional and psychological bent – something that was tested early on in their careers at James Capel when they were running North American equities during the 1987 crash.
The two men had started in the City on exactly the same day at the same firm, but whereas Mr Pattisson took the more traditional graduate trainee route, Mr Lang moved from academia, including an MA in financial economics and finance, the “early financial theory stuff”.
Unlike most of his peers in the city, Mr Lang headed straight for fund management, which at the time was “quite an unglamorous thing to do”, but which he explains appealed to him intellectually.
He was employed as a quant fund analyst, “a very exotic thing”, but on his first day, “was given a desk, a bank of telephones and someone else’s second-hand computer and basically told to be ‘quanty’ and do something. That was very much the spirit of that place.”
Mr Pattisson’s time on the graduate trainee scheme was shortlived before he too wanted to move into fund management. “I was taken on to be one of the financial equity salesmen, but quickly decided I wasn’t interested in it. I was more into fund management, too. They thought it was very odd that I’d been given this great opportunity to be an equity salesman and I wanted to work in the fund management department. They were fairly appalled if I’m honest,” he recalls.
In spite of this, he moved across and shortly afterwards the departure of the North American equities manager left a gap filled by the duo.
Mr Pattisson says: “Without a lot of qualifications we were looking after North American equities, but it did mean we were running money through the crash of 1987. Our view is the experience of running money in various situations helps you work out if you’re going to be any good as a fund manager, because it is a question of how you cope emotionally in both good times and bad. Doing that fairly early on in our experience was a pretty hairy-scary moment. It was useful and interesting.”
Mr Lang chimes in with the fact their boss had a kind of value process at a time when value investing was out of favour in the US. So for the first four years “we relentlessly underperformed through no fault of our own,” he says. “Again, it was a good experience to have as it teaches you emotional resilience.”
After a few years, the duo temporarily disbanded. Mr Pattisson went travelling for six months and, on his return, moved to the UK equities desk, while two years later Mr Lang jumped at the opportunity to go sailing round the world with some colleagues in a boat called Ardevora, a name later recalled in their fledgling business.
Mr Lang explains: “I was 25 and thought I needed to do something else. At the time, I was thinking: ‘I don’t like what I’m doing’. Then this [sailing] thing landed in my lap and I got this opportunity most people dream about, so I thought: ‘It sounds alright, I’ll go and do that.’ I was away for four years.”
During that time Mr Pattisson joined Flemings, rising to the position of head of UK equities. However, the two remained in touch, and when some ex-James Capel colleagues asked if Mr Pattisson be interested in joining a team reinvigorating the River & Mercantile brand – later to become Liontrust - he declined, but put them in touch with Mr Lang.
After a “lot of time to think” on the boat, Mr Lang realised he’d enjoyed fund management and so started developing some ideas based on behavioural psychology.
“When I got back, I thought I wouldn’t mind having a crack at putting some of those ideas into practice. I saw these ex-Capel unit trust sales guys, and they basically had a regulatory entity, a brand name, a kind of operational platform, a bunch of sales people and no fund managers.
“It’s fair to say they were quite desperate, so the prospect of employing someone who had just spent four years sailing, thought he had a bright idea and would work for not very much money was quite appealing. So that was the start of that adventure.”
Then in 1999, the owner of the River & Mercantile brand wanted to access his money and proposed floating the company, but it was felt they needed another manager to accompany Mr Lang.
“Jeremy being a broadminded bloke was only prepared to work with me,” laughs Mr Pattisson. “It was one of those things hard logic would have probably suggested I shouldn’t have done, as I had a lot of Flemings options and my fourth child had just been born. So I was completely mad, and also your performance was terrible,” he tells Mr Lang. “But sometimes in life you just get the sense you’ve got to do something, so that’s what I did.”
The Liontrust years were a success in the main, with the company seeing assets jump from roughly £500m to more than £5bn, but Mr Lang believes the company was floated “way before we should have been, and we weren’t really the sort a business that should have been floated”.
It was also a useful learning experience, with Mr Pattisson pointing out: “We learnt the lesson that its not good enough just to be good, you have to explain it, hopefully make it interesting, have a strong whiff of humility about you and be humble when you get it wrong.”
Mr Lang adds: “We worked out early on that you could be the greatest fund manager in the world, but you’ve still got to persuade people to trust you with their money, you have to go out and explain what you do and be prepared to account for what it. To be precious about that communicating side was going to get you absolutely nowhere.”
In addition Mr Pattisson notes: “Another lesson we learnt is most people don’t want to stay small and being efficient. Most people want the excitement of growing.” These differing ideas about how to grow the business are ultimately what led to their departure and the launch of Ardevora.
After a 12-month gap, the duo were ready to start again, but past experience made them wary of external influences on their corporate structure, preferring to keep it a stable partnership with no outside shareholders or joint venture partners.
“We did a complicated back of the envelope business plan working out how many years we could survive without anyone helping us financially. We thought five years was a reasonable time period to give ourselves a good chance to be successful enough to survive. But like all start-ups, to a certain extent you keep your fingers crossed. We were at least realistic that it was going to take time,” explains Mr Pattisson.
Now after the initial set-up, including having to use an iPhone and wifi in the local Starbucks to conduct business until the office had telecoms, they have a three-year track record under their belt for their strategies, a team of four fund managers, and assets under management at roughly £750m, so what are the next steps?
“All of them [the funds] have done well,” says Mr Lang. “But in the development of the fund management business that is just the bare minimum for survival.”
That said, Mr Pattisson notes: “We don’t want to expand the product range, we want to stick with our UK product and the global product with the two variations of each. We have no ambition to drift into other products or areas. We are ambitious in terms of the amount of money we think we can run, particularly in the global product, but we are very strongly of the view that you stick to trying to do a good job at what you think you’re good at. This year and next year is building on that period and getting to a stage of something meaningful. The next stage is really important.”
CVs
Jeremy Lang
2010 – Present – Co-founder, fund manager, Ardevora
1995-2009 – Fund manager, Liontrust Asset Management
1991-1995 - Sabbatical
1986-1991 – fund manager, James Capel Fund Managers
William Pattisson
2010 – Present – Co-founder, fund manager, Ardevora
1999-2009 – Fund manager, Liontrust Asset Management
1994-1999 – Head of UK equities, and various positions, Fleming Investment Management
1986-1994 – Fund manager, James Capel Fund Managers
