InvestmentsMay 9 2016

‘It gets more prescriptive in the big [fund] houses’

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The funds and their manager, Oliver Russ, are to join the business next month. The deal will take Liontrust’s assets under management to just above £5bn.

Mr Ions notes: “We’ve grown the business from £1bn five-and-a-half years ago to more than £5bn. A bit of that’s organic growth – a little bit through acquisition and also by attracting new teams where we can.

“[Mr Russ] is a fund manager with a very clear strategy. He’s got £300m of assets and a good following across our investor universe.”

The fund house is among the most active when it comes to buying in new strategies. In April 2015, Liontrust poached Kristof Bulkai, Patrick Cadell and Hugo Rogers from BMO Global Asset Management to launch a Global Strategic Equity fund and other alternative investment products.

Mr Ions says that being a smaller, more “personalised” business has worked in Liontrust’s favour.

He explains: “I think the key selling point was that we try as best as we can to create the right environment here – especially for the fund managers – which is to be able to run money the way they want to run it as long as they have a good, strong process that we believe in.

“We don’t have a chief investment officer so we don’t have to follow the house view. I think that from a fund management point of view it gets more and more prescriptive in the big houses.”

He suggests that understanding how managers run money and allowing them the freedom to do so creates a different environment from the majority of other fund groups. Part of the attraction is that Liontrust also offers managers and their products routes to market.

We’d like to diversify our asset base as best we can. The closure of the bond [fund] to a large extent was driven by the managers. John Ions, Liontrust

When looking to broaden its existing fund offering or to launch an entirely new team or product, the issue Mr Ions faces is building up a track record.

He says: “If we’re getting a new team on board, it takes three years to get a track record if you start from zero. You start with a smaller amount of money, and therefore you exclude some of the larger clients who won’t buy funds until they’re north of £100m in size.

“It’s not something that we won’t do because we’ve just done it with the global strategic equity team that we took on from [BMO]. But if we can get to a point where we can find somebody who has a good track record and comes with assets – to be able to put that into the distribution machine we have here to be able to grow that and take it forward. The downside is that it’s rare to come across opportunities like that.”

Mr Ions says the asset management firm is “not trying to be all things to all men” though, and he reiterates the latest hire, in the form of Mr Russ, complements Liontrust’s existing income products.

“Income investing has been important, but it continues to be even more important if you look at the way the pensions industry is liberalising,” he explains.

“People have to take more responsibility for their own future income requirements, and we’re trying to focus on that. We try to promote and sell our products along this process, so we place an awful lot of emphasis on making sure we communicate how we run money.”

This means an acceptance that a strong process will not always produce outperformance. He cites Liontrust’s flagship Special Situations fund run by Anthony Cross and Julian Fosh.

“Two years ago we did have a mixed period of performance, but the managers were wedded to the way they run money, believed very strongly in that process – and more importantly the clients believed in that,” he adds.

“Now the performance looks very good again, but through that period of underperformance we still had positive inflows every month for that year and I think that’s testament to the way we promote and sell the products.”

Unfortunately, the opposite was true for the firm’s fixed income offering, which succumbed to a period of prolonged poor performance at the start of this year. Liontrust closed its £33m GF Global Strategic Bond fund on January 29, less than three years after it launched, following the resignation of co-managers Michael Mabbutt and Felix Martin.

So will the firm attempt to broaden its fixed income offering again in the future, or focus instead on its equity and multi-asset funds?

Mr Ions says: “We’d like to diversify our asset base as best we can. The closure of the bond [fund] to a large extent was driven by the managers.

“After the realisation that we’d got off to a good start – we’d raised assets and the performance over the first couple of years was mixed – the assets fell back and that’s the challenge we had. How do you [improve] a sub-scale fund and how do you get the bigger people involved?

“The performance over the latter part of their time here was good, but we were coming from a point where we’d underperformed for the previous two years. At the end of the day it becomes a business decision as to whether we think we can take that forward or not, but it certainly doesn’t preclude us from looking at the fixed interest space and diversifying the asset base there.”

But a fund management chief executive has more to deal with than just product development. Asked what he expects to come out of the FCA’s asset management review, Mr Ions notes there is now more dialogue between fund management houses and the regulator.

He says: “I think regulation is a good thing provided it’s sensible. If you look at the bigger picture, we have a savings problem in this country – we need to encourage more people to save. But then you start looking at why do people not save.

“The industry has an image problem, and therefore I think it’s a good thing if regulation can get to the point where it helps address that without hampering asset managers’ ability to operate.”

CV - John Ions

2010 – present Chief executive, Liontrust

February – April 2010 Head of retail, Liontrust

2005 – 2010 Chief executive, Tactica Fund Management

1997 – 2004 Joint managing director, SG Asset Management; co-founder and chief executive, Société Générale Unit Trusts

1993 – 1997 Head of distribution, Aberdeen Asset Management

Mr Ions acknowledges the increased regulatory burden is a necessity for the industry, but he says it has to help itself by getting out the message about the importance of saving. It’s an issue that has clearly been brought into sharp focus by the government’s pension reforms. It’s also one he hopes will be picked up by the Investment Association (IA) when Chris Cummings joins as chief executive.

“I’d like to think that would be more of the message [from the IA] in terms of just improving the image and reputation of the savings side,” he points out.

“What the government has done by allowing people to have overall control of their assets is to give them responsibility. Once you take responsibility for your assets, or have a vested interest in those assets, you suddenly become more aware of what is a good product and what isn’t a good product.”

Mr Ions acknowledges the role robo-advice has to play in all this, although he observes: “At the moment, those [people aged] above 45 don’t trust the internet, so anything financial is a scam. The people who do trust the internet and have grown up on it don’t have the money yet.

“I think [robo-advice] will be important, but I think the advisers that will grow are the ones who have the big advisory networks of people. Their challenge in five or 10 years time will be how they transition to an electronic world.”