Investment boutiques thrive on freedom
Fifteen years ago, two hedge fund traders working for Credit Suisse were approached by Crispin Odey to replicate his successful asset management business for private clients. The result was Odey Wealth in Guernsey.
Despite building up a successful reputation for his contrarian strategies over the 1990s and 2000s, at the time Crispin Odey was not well known outside of the UK.
His offering suited risk-hungry investors, but the volatility of the Odey Continental European Fund, which beat the index by almost 35% when the market was down in the financial year up to early August 2002 but made losses in five of its 11 years to date, did not appeal to more cautious private clients.
Frustrated with the constraints of a large institution, Odey persuaded Geoff Marson and Shaun Le Messurier to leave Credit Suisse.
According to Marson, investors were let down in 2008 and 2009. In 2008, banks lost too much of investors’ money whereas in 2009 when opportunities existed they did not make enough: “Investors didn’t see the added value,” he says.
The chance to set up the Guernsey office in early 2008 gave Marson and Le Messurier a way of gaining a competitive edge.
According to Marson, being part of a smaller investment house allows managers to be more nimble.
His comment resonates with James Syme and Paul Wimborne at JO Hambro Capital Management, who together moved from Baring Asset Management for the same reason.
Both found themselves limited by the institution and transferred hoping to secure better manager freedom.
Marson was drawn to Odey because of the reputation of Odey himself and others in the firm.
He and Le Messurier saw there was a market to offer an adapted, more cautious version of Odey’s investment style.
They already had the contacts in Guernsey, Jersey and Switzerland.
But building the business was not easy. There were a number of barriers to entry, says Marson; in particular, the need for a three-year track record and a sizeable amount of assets under management, usually $100m to attract larger investors.
Rising regulatory barriers make it more difficult for market entrants today, says Marson.
“The barriers are going up all the time. We’re not seeing so many boutiques.” Those who do make it through need to seize the small window of opportunity available over the next two or three years to make money for clients, as stock selection opportunities are thinning.
In the longer term, demographic change will also drag on growth in the West.
Predictions like those have helped the Odey Opportunity fund to survive while competitors are closing, says Marson. Key to that survival is identifying trends early.