The rapid restructuring of Odey Asset Management, following allegations in FTAdviser's sister publication the Financial Times about founder Crispin Odey's behaviour, has shone a spotlight on one of the more traditional firms in the City.
Odey’s lifestyle seemed to represent a different era, with aristocratic clients and senior staff sometimes departing early on Thursday for a shooting weekend.
Much of the Odey Asset Management operation was based in Mayfair, an area more synonymous with hedge funds than the sort of investment funds that typically populate the portfolios of FTAdviser readers and their clients.
But as the company, from which Crispin Odey stepped away as co-chief executive in November 2020 as he prepared to stand trial on an allegation of indecent assault, grew in recent years, it expanded into a range of funds that were branded under the name Brook Asset Management (named for the street in Mayfair from where the staff work).
It is important to emphasise that Crispin Odey was found not guilty of that criminal charge and that he denies the accusations made against him in the Financial Times.
However, the firm is now looking to sell off some of its funds to other parties, as well as other fund management activities.
The creation of the Brook Asset Management subsidiary occurred around the time that Odey faced criminal prosecution.
None of the funds branded as Brook were personally managed by Crispin Odey, with Brook Asset Management being a subsidiary of the main Odey business. Companies House records state he is the “ultimate controlling party” for Odey Holdings.
Since those accusations emerged, a host of firms and wealth managers have withdrawn their investments from the funds branded either Odey or Brook.
Among the firms to withdraw capital at the time of writing are Schroders and Columbia Threadneedle while the Evelyn Partners international model portfolios (that is the ones not run for UK-based advisers) continue to own some Brook Asset Management funds.
Columbia Threadneedle sold their exposure to the Brook Continential European fund last week.
Numbers crunched
An analysis by FTAdviser of data provided by Morningstar Direct indicates that Brook Asset Management had total assets under management of just over £3bn at the end of May 2023.
This is spread across 17 funds; of those, the Swan fund has already been closed down following the allegations, while others have banned redemptions
That firm’s most recent set of accounts, which cover the period to the end of November 2021, show a pre-tax profit of £1.1mn on a turnover of £59.4mn, compared with a loss the previous year of £27mn on a turnover of £28mn.
Brook Asset Management paid out total dividends of £3.1mn in the calendar year 2021, having not paid any dividend in the prior year.
An analysis by FTAdviser, using data compiled by Morningstar Direct, indicates that Brook Asset Management had assets under management of just over £3bn in funds that can be invested in by UK advisers and wealth managers.
Data from FTAdviser’s sister publication, Asset Allocator, indicates that only one Brook Asset Management fund, the aforementioned Absolute Return Strategy, has gained any traction among the UK’s largest wealth managers, appearing in two of the portfolios that publication tracks.
Some of Brook's funds, none of which are managed by Odey himself, have suffered in the fallout, with Brook Absolute Return, which is £145mn in size, and the £192.3mn Brook Developed Market fund, being gated as a consequence of client withdrawals.
But Odey’s involvement in asset and wealth management has stretched beyond the entities that currently or previously bore his name.
A representative of Somerset Capital, an emerging markets fund management firm, confirmed that a company owned by Crispin Odey was a partner in the Somerset business until 2016. The business was founded by the Conservative MP Sir Jacob Rees-Mogg, and Lord Dominic Johnson.
Johnson, who is not related to Boris Johnson, became a member of the House of Lords under Prime Minister Liz Truss and is now a minister for international trade.
Rees-Mogg was chief executive of Somerset Capital until he was elected to parliament in 2010, at which point Lord Johnson succeeded him until becoming a minister.
A representative of the wealth management firm Ruffer also confirmed that a company of Crispin Odey, while not involved in the day-to-day operation of the business, did “share a commercial interest”, with Ruffer in the 1990s when Odey helped Jonathan Ruffer and the Earl of Ferrers launch that business.
Bigger picture
The FCA had been investigating non-financial misconduct and corporate governance issues at Odey Asset Management in recent years, and concerns that Crispin Odey wielded too much power at the firm, even after he stepped down as chief executive in 2020.
The notion of an all-powerful fund manager with his name over the door being able to dominate a firm is something that has been on the minds of many investors since the debacle surrounding the collapse of Woodford Investment Management.
Ben Yearsley, investment director at Fairview, says: “Events at some of the boutique-type firms in recent years have really meant that investors, such as me, are putting corporate governance higher up our list of priorities when looking at a firm.
"I think investors are very wary now when they see a scenario where the fund manager is the majority owner of the company, and the ceo, and managing the money.
"The thing is, the same fund managers wouldn’t tolerate that in a listed company they might look to invest in, so we as clients of the fund manager have a right to be concerned about governance there. And that applies even if the fund manager isn’t the chief executive, as if they are the majority shareholder they still have control.”
James Sullivan, head of partnerships at Tyndall, said: "It has always been a bittersweet experience for any firm that has been fortunate to harbour a star-name fund manager; their high personal profile can help attract meaningful assets, but the key-person risk and distortion of asset gathering has always been a cause for concern.
"There is little doubt that from both sides of the camera (asset managers and the buyside) the perception of the so-called star manager is not what it once was.
"Where they do still exist, it is imperative that guardrails are erected around them to ensure they adhere to appropriate levels of governance and cannot stray from objectives, whilst asset flows should be measured and monitored to ensure they remain suitable for the liquidity profile of the mandate.
"Many firms prefer to adopt a team-based approach where possible, diluting any one significant influence over assets.
"We have experienced before that where assets lead, egos follow, and no one wants to create a monster. At such point it can be hard to row back.”
Crispin Odey’s entanglements with regulators have been going on for more than two years, and may have a long time to run yet, but for advisers and their clients there is much to ponder about the risks of investing in firms where one outsized personality dominates.
David Thorpe is investment editor of FTAdviser
