Andrew Shepherd, the firm’s chief executive, told FTAdviser today (March 10) outsourcing discretionary fund management is “definitely something advisers want to talk to us about”.
Total funds under management climbed £800mn to £17.3bn in the six months leading up to December. They were up 5.3 per cent over the half year.
“Success has been all about working with advisers who want to outsource to DFMs,” said Shepherd, who himself started off in financial planning before moving into investment management.
It doesn't happen every quarter because it is such a big change.Andrew Shepherd“It really is about partnering with IFAs, which is something we’ve been strong on for the last 20 years. At this point in time, it's definitely something that advisers want to talk to us about.
“It is a big change for them in the structure of their businesses, so we don't do one a week of these. But when they [advisers] do make that change, it's a really good partnership between us.”
Shepherd said flows can become quite lumpy when clients come onboard via its business-to-business adviser offering, which it calls ‘Brooks Macdonald Investment Solutions’. “It doesn't happen every quarter because it is such a big change.”
Net flows between July and December reached £326mn, turning positive after the investment manager recorded £367mn of outflows in the second half of 2020, according to its half-year financial results published today.
“Net flows have picked up over the quarters,” said Shepherd.
The firm’s Platform Managed Portfolio Service accounted for a portion of this rise in funds under management, recording a 20 per cent uptick in inflows over the half-year.
Asked about fund performance, Shepherd said the second half of last year “was ok”. In the final three months, funds achieved just half of the gains set by the benchmark index.
We seem to be pretty much in the middle of the pack [for fund performance].Andrew ShepherdHe said this was down to the fact that compared to the MSCI Pimfa Private Investor Balanced Index, which is “very index-based and large cap-based”, Brooks Macdonald and its peers have more small and medium cap exposure than the index does.
“So at times like this when the large cap are doing well, predominantly because oil is doing really well, and energy is doing really well, and defence, then we would underperform the index. What we look at is how we’re doing against peers, and we seem to be pretty much in the middle of the pack.”
Shepherd said this was the case for the first two months of this year too. Though the firm did confirm in its results it had no direct exposure to Russia in its discretionary client portfolios or its funds. While indirect exposure sits at around 0.1 per cent of total funds managed.
We are very particular in what we buy. We’ve seen over time what damage a poor purchase can do to a business.Andrew ShepherdBrooks Macdonald’s underlying profit before tax rose to £17.6mn, meaning its underlying profit margin was up 3.3 percentage points to a “new high” of 28.4 per cent.
Shepherd said while “we didn’t know we were going to need it at the time”, in light of the recent invasion of Ukraine by Russia, it puts the investment manager in a stronger position.
The chief executive said Brooks Macdonald is “active” in the mergers and acquisition market this year, and is open to deals if “the right thing comes along”.
Last year, it bought Cornelian Asset Management and Lloyds’ Channel Islands wealth management and funds business.
“We are very particular in what we buy,” said Shepherd. “We’ve seen over time what damage a poor purchase can do to a business.”
Digital update
For the last 18 months, Brooks Macdonald has been in the midst of a digital transformation of its back-office, funds, and onboarding process for advisers.
Shepherd said he was excited to launch digital onboarding for advisers. “It’s a real step forward, instead of them receiving 240 pages it’s all online.”
The firm is currently in the roll out process of digital onboarding. Its technology partner is SS&C, which recently bought Hubwise.
The firm is currently migrating the last part of its client book to the SS&C platform, but it is now looking at ways it can build Hubwise capabilities into it.
“This means it is taking a bit longer with the build, but it’ll offer much better long-term benefits.”
A new client portal is also set to land once the migration to SS&C is complete.
ruby.hinchliffe@ft.com
