Long ReadApr 20 2022

'The consultants said our £3.5bn AUM would be zero in a few years'

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'The consultants said our £3.5bn AUM would be zero in a few years'
Lionel Aeschlimann of Mirabaud Asset Management

Shortly after Lionel Aeschlimann became responsible for Mirabaud Asset Management in 2011, he was presented with a startling problem. 

He says: “We had assets in the asset management business of £3.5bn in UK equities, all institutional money, and we had some fund-of-hedge-fund strategies. And all of the pension consultants I spoke to said the same thing, that they were moving away from active management and also towards global funds and away from UK equities. They told me the £3.5bn would dwindle away to zero within a few years.” 

For Aeschlimann the situation was particularly acute, as his background was in the far more discreet and sedate worlds of the law and of private banking in his native Switzerland, so he had to learn both the asset management market, and the skills of being a chief executive at the same time. 

Financial background

Aeschlimann is by training a lawyer, and worked in that field as an adviser to private banks and finance houses for many years prior to joining Mirabaud, a private bank founded more than 200 years ago, as a partner in 2010 and, as part of his responsibilities, became chief executive of what became a separate asset management business, as the bank looked to move away from simply running institutional money.

He says: “As a lawyer, I advised banks and asset managers, but they don’t have to take my advice. Sometimes I wouldn’t even know if they took my advice because they bring you in for a specific purpose, then you move on to the next client, then the next one.

"But as chief executive you have to think longer-term, and your decisions are implemented. It is no longer the case that you are a ship safe in the harbour when things are happening at sea; now you are at sea, steering the ship. I think I under-estimated that, now everything is something I have to concern myself with.

"Changes to banking rules meant Mirabaud had to change as a bank, and prepare for a new world, and part of that is building out a substantial asset management business.

"When I joined the firm and it had the £3.5bn in UK equity mandates, and three or four people working here, that was all." 

Faced with the prospect of a shrinking institutional asset management business, Aeschlimann decided to shift the focus to the areas where he believed growth could be achieved, moving into global equities and fixed income in the UK, as well as European equity and institutional mandates in Europe, and to focus on the adviser market. 

He says that while the £3.5bn in UK equity money it ran did vanish to zero, that amount and more has been placed with the asset management arm over the past decade via the newly launched mandates. 

Aeschlimann says: “I think the adviser market saw us as a bit of an anomaly when we launched first. Sure, we are part of a 200-year-old bank, but we were also new as an asset management business. It took us three or four years to hire a head of global equities. We had a very specific criteria in mind.

 Miraubaud is a partnership, so the cake gets shared very widely, whether the cake gets bigger or smaller.Aeschlimann

"The portfolios run here are all very concentrated, very long-term and we buy quality companies. We are very happy with who we hired. In the end we were a little surprised that people wanted to leave the established fund houses they worked at to come to work for us. So then I think, what can we offer? Well because we are smaller, they have more freedom when they work here – now that is an advantage as well as a disadvantage.” 

He says the freedom to operate autonomously means they have less bureaucracy to contend with, but also: “There is nowhere to hide. Maybe at some of the bigger firms, they can maybe hide a little bit. In terms of rewards, Miraubaud is a partnership, so the cake gets shared very widely, whether the cake gets bigger or smaller.

"We want them to have freedom, I mean if you hire a pianist, you must let them play, but also, we want them to have humility. We would ask them about previous periods of underperformance in their career, do they understand why it happened, do they care why it happened, or are they trying to blame someone else? Because here, they can’t really blame anyone else.”

While the image of the business as conveyed by Aeschlimann is almost of a start-up, the private bank is a very well-established business indeed, with deposits of £40bn and establishment connections running deep. 

Markets

Mirabaud Asset Management recently launched a fund for European clients that invests in early stage companies. The idea for the fund came from a former French cabinet minister with whom Aeschlimann had a breakfast meeting. 

Aeschlimann himself was educated at the College of Europe in Brussels, an institution which has educated large numbers of the political and business class in Europe. 

He says that, at present, the UK business will focus on the adviser market, and the existing fixed income and global equity product ranges, though other products have launched for institutional investors. 

The total assets under management of the business is over £7bn,

 As chief executive you have to think longer-term, and your decisions are implemented. I think I under-estimated that, now everything is something I have to concern myself with.Aeschlimann

Aeschlimann says future product launches will be driven by client demand, and they are unlikely to launch anything that has fewer than £100m of assets on day one: “We are not going to launch anything in the UK imminently, we want to focus on what we have. I was hugely surprised and delighted to be able to attract those people here, and it is for them to grow their strategies from here.”

Mirabaud Asset Management has existed for just over a decade, and remains a toddler by the standards of its peers, but Aeschlimann is aware of the 200-year history of the parent company, and is in no rush to crash and burn – something advisers will be mindful of, given our industry's history. 

David Thorpe is special projects editor of FTAdviser