agement is less
ll small compared
t firms, but it has
roup of investment
client portfolios under
nt way
things
Proposed P asset allocation
General G int’l
equity e 22%
UK U equity 25%
Source: S Gore Browne IM
has brought in more clients
and recruited more staff,
which has led to more
money invested and greater
profits for both clients
and the company.
One of the shared principles
on which they invest
money is the desire to do
so across multi-asset portfolios,
something reflected
in the make-up of the nonexecutive
advisory committee:
Nigel Blanshard (set up
the Culross fund of hedge
fund business); Michael
Fixed interest 10%
Soames (head of commercial
for Knight Frank);
Hugh Stewart (private
equity); James Robinson
(ran Witan Investment Trust
and was head of investment
trusts and hedge
funds at Henderson); and
David Oakes (current
CIO at Mercater Capital
Management).
James runs the asset
allocation committee with
this group of learned individuals
alongside the inhouse
experts to take a
long-term, three- to fiveyear
view. They then add
in a shorter-term tactical
perspective where they
can deal with what James
describes as “the very
sharp risk on/risk off mentality”
before working out
the different proportions
of each for different types
of client.
Int’l themes equity 15%
Infrastructure 10%
Alternatives 10%
Cash and liquidity 8%
l Different approach
Unlike many of its peers,
Gore Browne does not
have a focused buy-list of
funds or securities; it does
not have any asset allocation
meeting any more
frequently than once a
month; and this committee
does not actually set the
asset allocation.
“Instead it kicks the tyres
of what we are doing, questions
whether we are aware
enough of the risks in the
market,” James explains.
“It is more likely to
focus on the risks than the
opportunities on the basis
we can work out where
we think the opportunities
are but need someone to
stop us going too far.”
The actual investment
decisions are ultimately
made by the individuals
looking after the clients.
“Other bigger companies
with broader distribution
are driven by economies
of scale. They will blame it
on the FSA and risk management.
What it means is
they probably become very
oriented towards a benchmark.
We do not think
benchmark investing is the
right thing to do.
“There is a real conflict
here as the FSA talks about
knowing your client, treating
customers fairly, understanding
what kind of risk/
loss tolerance they have. It
is absolutely non-sensical
to believe that you can
define that in five different
categories. It is totally
irrational. But at the same
time we have the potential
weakness that we make
sure we are doing the same
things for everybody.”
l Matter of choice
This combination of
experience and different
strengths has contributed
to some of the big decisions
they have taken – no
gilts until 2008; selling out
of investment trusts that
were at a premium or relatively
geared; and holding
25% in cash by the middle
of that year.
The credo is that
investments have a great
deal to do with common
sense. They are certainly
no quant-based firm, nor
are they great believers in
model portfolios, although
they may be forced to
change this approach.
WEALTH MANAGER PROFILE SIMON JAMES
James explains: “There
will be [model portfolios]
because 100% of our business
today is directly with
private clients, but we
would like to start doing
quasi-institutional business
with IFAs and other
intermediaries.
“We are benchmarkaware
not benchmark-driven.
Essentially, clients give
us their money so we can
make them more money.
While we do not hold ourselves
out as being absolute
return managers, we
would not invest in an
index because we believe
there are components of
an index that are likely to
perform badly.”
He asks: “If you go to a
horse race, why would you
back every horse?”
l Likes and dislikes
Gore Browne has strong
investment views from
macro, thematic, strategic
and tactical perspectives.
It does not like banks
but likes the commodity
supercycle story; it does
not trust the speculative
leverage from property
and private equity; and
it is a strong believer in
infrastructure, both franchises
and construction,
with it being “pretty obvious”
the Government will
invest a lot more with the
private sector.
James’ one dominant
macro theme is the lack of
clarity of whether we will
have deflation or inflation,
now we are at the end of a
30-year period of declining
inflation and interest rates,
corporate and household
leverage.
He concludes: “Capital
will be scarce for years
to come, so we focus upon
opportunities which generate
foreseeable cash flows,
or where we are rewarded
for supplying capital.”
While we do not
hold ourselves out
as being absolute
return managers,
we would not invest
in an index because
we believe there are
components of an
index that are likely
to perform badly. If
you go to a horse
race, why would you
back every horse?
JANUARY 2012 [www.portfolio-adviser.com] PORTFOLIO ADVISER
“
”
Simon James, founding partner,
Gore Browne Investment
Management
19
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