Investments  

‘We don’t have to take on volatility’

‘We don’t have to take on volatility’

Ingenious’s Guy Bowles talks succession planning, the risk-reward conundrum and fund fee pressure.

Is a dual CEO and CIO role sustainable at a growing firm?

If we continue to grow at the pace we have been, it’ll be hard to carry on [doing both roles]. Today I’d say the role from which I would step back would be CIO: bringing in the Thurleigh team means we have more strength on the investment management side. We would have to bring in an external CEO if I were to step back from that role, but that is not the case for a CIO.

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How have recent acquisitions, such as that of Thurleigh last year, affected clients’ opinion of the firm? Would you consider further deals in the future?

Clients were not necessarily minded to leave, but they became very sensitive to short-term performance. Pleasingly, over the past 12 months we have been up 2 to 4 per cent at a time when the UK market is down a couple of per cent.

A third of our growth has come organically, a third through acquisitions, and a third through strong returns. We would like to do more merger and acquisition activity. None of the people who joined us from previous acquisitions have left.

We are looking at businesses that are of a similar size or slightly larger than ourselves. We looked at Heartwood [in 2013] but weren’t willing to pay what Handelsbanken did. That doesn’t mean it was a bad price, just a very different opportunity for them.

What have been the most significant changes in the industry in recent years, from an investment standpoint?

One of the most fundamental changes has been the focus on benchmarking and what clients actually want. I would say 90 per cent of clients are looking to beat cash or inflation, with 10 per cent having a more traditional blend of gilts and equities.

If you don’t have cash or inflation as your benchmark, you’ve probably got the wrong benchmark.

Given both inflation and returns on cash have been negligible for some time, is there a danger of complacency setting in?

It’s still pretty hard to beat cash and inflation. Historically you could do that with fixed income. Now you can do it with equities, but the other side is how much risk you take and the question of suitability.

[For money that has historically gone into fixed income] we are looking for managers who can generate alpha. On the equities side, the likes of Lindsell Train are great fund firms, but most of its return is going to be market related. Predicting the long-term returns of markets is easier than doing so for fund managers. So what we want is liquidity, transparency, low volatility and funds that are uncorrelated with those we hold on the [equity] side.