Big boutique back on the front foot

Martin Currie, one of the first UK fund managers to announce a redundancy programme in 2008, when 19 mainly back office staff were cut from the payroll, is once more in expansionary mode, both launching funds and adding new hires.

While the company says the shrinkage in operational staff reflected increased efficiency, with less employees now needed to complete the once onerous tasks of transitioning new mandates, latest recruits are being taken on in both portfolio management and distribution. Switzerland is one case in point, where a Zurich office has been opened under Dominik Issler, ex Swiss CEO of Fortis Investments.

Martin Currie already runs two major mandates for Swiss institutions – a sub-advisory arrangement in Chinese equity for Vontobel and a global equity portfolio on behalf of UBS. The Swiss expansion is an indication of the aim to broaden the Scottish house’s private banking penetration.

Running almost £12bn (€14.6bn) in assets, 30 per cent of this in pooled funds, Martin Currie has quietly been boosting its Chinese equity presence, with a team of 11 Mandarin-speaking portfolio managers now operating out of Shanghai, reporting to James Chong, a Chinese national based in Edinburgh. Chinese equity represents 28 per cent of the firm's managed assets.

The groups’ European distribution push has included the addition of Eric Bateman, recruited from Investec Asset Management as head of European sales and client servicing.

But it is the acquisition of $280m (€220m) in hedge fund assets plus staff from Sofaer Capital, with its relationships in the family office and institutional sphere, which should lead to the greatest boost in product capacity. As a result, Martin Currie will be launching three long-short equity strategies in a Luxembourg-registered Ucits III format at the beginning of October, subject to regulatory approval.

The European Absolute Alpha fund will be managed by Michael Browne and Steve Frost, both of whom joined as part of the acquisition of Sofaer Capital, where they had 20-year joint track records in European equities, with returns well ahead of the MSCI Europe index over the last 10 years. New long-short funds investing in Japan and global resources will be managed by long-term Martin Currie employees.

The funds will continue to focus on large cap stocks. “We are very cognisant of capacity, which is why we don’t do small cap products, which are very illiquid,” says Andy Sowerby, Martin Currie’s head of global distribution. “Large cap is our skill-set, where we have our resources.”

The fund house, which calls itself “the big boutique,” employs 63 portfolio managers across just six strategies, with teams generally working across both traditional and long-short portfolios.

“You can be medium-sized without being mediocre,” believes Mr Sowerby. “Many boutiques are built on just one person, with a single product focus and don’t have the resources to get through a crisis,” he suggests.

“But we are putting our intellectual capital behind very few strategies where we have capacity.” The firm recently closed down its UK growth funds, as most clients have moved away from domestic UK equities in favour of a more global outlook.

Martin Currie’s conversion from top-down sector allocation to a stock-picking mindset has come under scrutiny, admits Mr Sowerby, because the market has seen much more top-down influence in 2008 and 2009. “But we don’t pick stocks in a vacuum – top-down influences still matter and influence our bottom-up selections.”

Just before the recent acquisition, Andrew Graham left Sofaer Capital to join Martin Currie’s growing Asian equities business, although Mr Sowerby insists the two events are unconnected. “Andrew was top of our wanted list, and we were interviewing him before the acquisition opportunity turned up. He was the best person in the market. It’s just one of those things.”

Emerging markets are still hugely under-represented in clients’ portfolios, believes Mr Sowerby, with half of the world’s economic activity soon to be generated there.

“What we were doing in emerging markets was not competitive enough,” he says, explaining the hiring of a six strong team from his former employer and rival fund house Scottish Widows. The launch of a “high conviction” Latin American fund is expected in October.

Andy Sowerby, Martin Currie