Investments  

AJ Bell looks to boutiques for MPS service

AJ Bell looks to boutiques for MPS service

Ryan Hughes, who jointly runs the model portfolio service at platform business AJ Bell, is focusing on boutique firms run by big name fund managers as they can offer a "track record".

Mr Hughes has funds invested in Crux Asset Management, which was founded by Richard Pease, who was formerly employed as a European equity manager at Henderson Global Investors and New Star. He now runs two European equity funds at Crux.

Mr Hughes has also deployed capital from the managed portfolio service into Tellworth UK Smaller Companies fund, which is run by the former Schroders small cap managers Paul Marriage and John Warren.

Mr Hughes said: "We like managers who have left to set up a new firm. They have a track record, and by setting up a new firm can manage the money in the way they want.

"Sometimes when a manager runs a large amount of money at a big firm, what they are doing is managing their own career risk, not the money for clients, but managers who set up on their own, are back to managing the money.

"There is an alignment of interests between the manager and the clients."

Darius McDermott, managing director at Chelsea Financial Services, said those managers might not always be good at running a business so it was important to check they had the right infrastructure around them.

He said: "When a manager leaves then there are usually a few reasons behind it.

"The first is that the big firm they worked for has given them too much money to manage, and it is hard to do this effectively.

"The second is they may not enjoy the red tape and extra responsibilities of working at a big firm, and the third is economic, that is, they leave because they want to keep a larger portion of the revenue they generate.

"I think if a manager leaves a big firm to start a boutique for one of those reasons, then we would be quite supportive of a manager setting up a boutique, but not all fund managers are good at running businesses, so it is important that they have the infrastructure around them, in terms of HR and compliance."

Mr Hughes acknowledged that the market is full of competitors offering managed portfolio services to advisers.

He said one of the ways he believes AJ Bell’s offering is different is that he won’t take short-term views on asset allocation.

Mr Hughes said: "Some firms run asset allocation on the basis of what will happen in the economy over the next six months, or twelve months, but I don’t think anyone can really do that. We do asset allocation on a one to three year basis, with tactical changes in between."

david.thorpe@ft.com

What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know.