Gary Shepherd 2017-12-01 07:36:14
THE SURVIVOR
Three years after a management buyout, the head of managed funds at Waverton is spearheading its progress in running client money in a cost-conscious world
John Bellamy has a number of employers on his CV yet has, to some extent, always worked in the same place. He brings a unique insight to the changing shape of wealth management in his role as head of managed funds at Waverton Investment Management, with more than a quarter of a century of experience.
From a humble start as a messenger at broker Buckmaster & Moore in 1982, the acquisition of the company by Credit Suisse in 1987 helped Bellamy progress. He rose through the ranks from a relationship manager to head of portfolio management in the financial services giant’s discretionary business in London.
In 2001, Bellamy changed teams again following the takeover of JO Hambro Investment Management by the acquisitive Credit Suisse. Then, in a further twist, he was part of a management buyout of that discretionary team, in 2013, which saw the formation of Waverton as it is known today.
Celebrating 30 years since the original JO Hambro team was formed in 1986, the company now has approaching £5bn in assets, with 90% of the 120-plus staff owning shares in the firm. Currently, there are 28 portfolio managers.
“With this we are all in it together. We all put our hands in our pockets and have made significant financial commitments,” says Bellamy, who now sits as director, head of managed funds service.
“It makes you far more collegiate, and there is genuine joy when other teams bring in some new business. In bigger organisations that isn’t always the case, but the MBO has been a real positive bringing new energy.”
Whether the business rises or falls, he says, lies with investment performance. This focus has meant a narrowing down of its asset allocation committee to four, with input from portfolio managers, and changes to how it invests in its core models. The models – defensive, cautious, balanced and growth – are run through a global multi-asset approach.
They are risk-rated and managed in a unique fashion in that each of the asset classes is wrapped in an in-house oeic. The equity and alternative components are run by Bellamy’s managed funds team, while bond allocation is headed by Jeff Keen, director of fixed income and macro research.
A broad base
The team has recently added a “fourth leg”, splitting the core and tactical equity allocation. Making up around 60% of exposure to the asset class, the core is directly invested in stocks with no geographic or sector bias and is operated by the institutional global equity team at Waverton.
Bellamy’s team then overlays that with its favoured geographic, currency and style positions through tactical equity holdings in favoured funds.
“We offer a genuine institutional process and portfolios that are accessible to clients via IFAs on a platform,” he says. “The fourth leg brings down the TER of the portfolios considerably as well, because you are dropping some third-party components.
“In a market that is becoming incredibly cost conscious, that is very important to us and our clients. Our balanced model goes from a 1.1% total expense ratio down to 82bps, and that’s important from the IFA’s perspective; the TER goes lower but our margin is maintained.”
Bellamy believes the team is now at a place where it has the “best of everything” throughout the portfolios. “We’ve got direct bonds, but we don’t rule out some active bond funds if necessary. We’ve also got direct equity as a core with a very targeted specific return of index plus, but with very low volatility,” he says.
“Around that we can build our tactical views through active, passive or structured notes. Our protection strategy is built in, which is an insurance policy; then in the alternatives space we have some structured notes, aircraft leasing, student accommodation and catastrophe insurance.
“The investment world of products available to us is so broad and sophisticated now, it’s a far better place than it has been for some time.”
With this in mind, Bellamy stresses the team does not just pay “lip service” to multi-asset, with a philosophy of looking at “anything and everything”.
Highly responsive
Asset-backed is an area of investments in which the managed funds team has been taking more of an interest in recent months, including the aforementioned aircraft leasing and infrastructure funds.
Bellamy says: “Infrastructure yields around 4.5-5% but there are several things you have to be mindful of as well, including the high premiums in the space and the fact that liquidity is not always there.
“There is no point running 4-5% weighting to one of those positions; you have to get as many of them as you can. We don’t just hold HICL but also GCP, 3i and INPP with a small percentage in each one, while keeping an eye on the premiums.”
While Bellamy insists Waverton is “absolutely wedded” to active management, it makes sense that the wealth manager would take an “active” decision to explore passive funds as well. For example, it uses two factor funds for its exposure to US equities.
A small portion of passive exposure is also held in other geographies, giving the team the option of moving quickly should macro events trigger swift market movements. For example, Bellamy says the team acted quickly following the outcome of the UK’s EU referendum vote in June.
“As soon as the markets opened at 8am we added money to the UK and moved money from Europe to the FTSE 100 because we wanted large-cap exposure for the currency. We couldn’t have moved that fast in active funds,” he says.
“It was a lesson we learned in 2008-9. You have to have a part of your portfolio that you can take out or put in instantaneously rather than on an intraday basis.”
Some of the active managers the team has stuck with include James Hanbury at Odey Asset Management, Julie Dean at Sanditon Asset Management and Edward Lam at Somerset Capital Management.
Bellamy describes his current stance as modestly risk-on, although he prefers to use the term “controlled risk”. “We want to participate, but with caution. We were moder-ately underweight equities but we’ve allowed markets to rise and we have not cut back,” he says.
The team has added to gold, while also increasing cash levels and adopting a longer duration within fixed income.
“Our protection strategy has the dial turned up higher than it has been for some while: it’s seven out of 10 rather than three out of 10,” he says.
“Yes, we are slightly overweight equity and we understand that risk, but if something goes wrong I don’t want any nasty surprises from other parts of the portfolio, while also having some cash to spend.
“There is no point in having a sell-off if there is no dry powder left to make the most of it when it happens.”
From a personal perspective, he adds: “I used to think that a lower-for-longer scenario would be better for markets because equities would look optically cheap against other asset classes.
“However, I can see now that if rates do move then, because they are so data-dependent and moving on the basis of a stronger economy, that may not be negative either.
“The outlook may be rosier than it has been for a while despite being seven years into a bull market. It is not the time to be betting the house but it is not the time to be taking all the chips off the table, either.”
Entrepreneurial spirit
Looking ahead, Waverton will reap the rewards from recent additions to the business, including the appointment of Andrew Fleming, chief executive officer, who joined from Kames Capital in July 2015.
Two years ago, the firm also launched its multi-manager Cautious Income Fund, run by Bellamy and James Mee. This aims to give more investors access to its ideas, and the firm is open to further launches should the IFA community demand it.
“There is a change in the dynamics of the relationship between the IFA and the discretionary manager, who used to be the lead in the relationship, or at least thought they were,” Bellamy says.
“It is quite clear from this new dynamic in the industry that the IFAs and clients are the ones with the power and we are service or product providers to them.
“We recognised that early and are looking to build our business through partnership programmes with IFAs, either offering models on platforms or possibly unbundling our models or offering consulting.
“We see ourselves as being entrepreneurial and ‘can do’ in the space. We are having discussions with a number of IFAs at the moment who all want something slightly different and we are engaging with them to see how we can use the broad key strengths of Waverton to help.
“It is one of the few real growth areas in the industry at the moment.”
‘WE ARE ALL IN THIS TOGETHER. WE PUT OUR HANDS IN OUR POCKETS AND HAVE MADE SIGNIFICANT FINANCIAL COMMITMENTS’
‘THE INVESTMENT WORLD OF PRODUCTS AVAILABLE TO US IS SO BROAD AND SOPHISTICATED NOW, IT’S A FAR BETTER PLACE THAN IT HAS BEEN FOR SOME TIME’
‘IT IS QUITE CLEAR FROM THIS NEW DYNAMIC IN THE INDUSTRY THAT THE IFAS AND CLIENTS ARE THE ONES WITH THE POWER AND WE ARE SERVICE OR PRODUCT PROVIDERS TO THEM’
BIOGRAPHY
John Bellamy is head of Waverton Investment Management’s managed funds service and lead manager of its Equity and Cautious Income funds. He officially joined the team in 2007, following the takeover of JO Hambro Investment Management by Credit Suisse in 2001, and was later part of the management buyout that formed Waverton in 2013.
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