SCM Private invites clients to follow in its footsteps

Alan Miller, co-founder of wealth manager and family office SCM Private, set up the group with his wife Gina in June 2009, when they couldn’t find a reputable bank to run their own small fortune.

“My personal experience of some of these companies was that the people on the other side of the table have a row of baked bean tins which they are selling that month,” he says only half-jokingly, referring to the typical experience of private clients interacting with wealth managers. “Next month they give you the same sales story for tomato ketchup.”

Most of the products which fill private banking portfolios are typically launched on the back of a period of strong performance, at the worst possible time to invest, he reckons. Moreover, most private bankers are not following their own recommendations to clients.

“Because we are substantial co-investors alongside our clients, if we don’t want to invest, we shouldn’t be selling it to them,” says Mr Miller, who prefers to offer clients a diversified, managed portfolio of funds, rather than an account biased towards latest flavours of the month.

Clients invest alongside the Millers’ own family fortune, which accounts for a major but undisclosed share of the £100m (€125m) in assets under management. Indeed Mr Miller’s high profile divorce from his first wife while at fund house New Star – which led to analysis of his assets in the UK press – was cited by group founder John Duffield as the group’s over-arching concern at the time.

“The advantage of running a large amount of your own personal wealth is that you will be more focused on long-term performance, rather than decisions based on whims and fancies,” believes Mr Miller.

Indeed his contrarian thinking has led him to avoid China and overhyped emerging markets, especially because Fidelity’s Special Situations fund under Anthony Bolton was making such a marketing push about the region. Currently, he believes stories about an imminent collapse of the euro are over-hyped by the press.

Despite having made his name as a high-profile hedge fund manager from 1997 onwards, where he was a star performer at Gartmore and Jupiter before New Star, Mr Miller is no longer such a strong believer in active management as in his heyday, when his funds were averaging more than 17.5 per cent per year.

“Information is decimated much faster and more equally, which means your edge is much harder to maintain today than five or 10 years ago,” he maintains. The start of the slippery slope began at Gartmore, he says. Management decided there was too much deviation of returns between different clients and that allocations and stock selections should in future be determined by an investment committee.

“I told them that this marks the end,” remembers Mr Miller in a side-swipe at the bureaucracy enveloping much of the traditional asset management world. “Once you destroy this art-form with committee-led investment decisions, it is inevitably disastrous and you end up with poor performance.”

Exchange traded funds (ETFs), which he lauds for their liquidity and highly-regulated nature, are central to the success of any wealth manager today, he believes.

His wife and marketing boss Gina Miller talks about how they invited a group of ETF managers into SCM Private’s Chelsea offices to discuss allocation of portfolios, only for the market rivals to end up at each others’ throats in a scrap about whether derivative-based or physical replication ETFs should rule the roost.

“I told them to grow up and stop fighting,” says Ms Miller. “I told them their market share will grow even more if they just shut up for a few minutes.”

ETFs, believes her husband, offer more speed, less risk, lower fees and better liquidity than most actively managed funds and are ideal for the core of modern portfolios, although investors do need to look under the bonnet, particularly for emerging market ETFs, rather than plain bond products. “There has never been a single exchange-traded fund which has been suspended,” he says to reassure clients.

Indeed Mr Miller advises many clients to invest in portfolios of pure ETFs, at a lower cost, rather than paying for closet-indexing with active fees, which particularly raises his ire. “You get absolute return funds holding 40 per cent in ETFs, yet charging clients as if they are choosing stocks, which amounts to dishonest closet indexing,” he says.

“This is more scandalous than anything,” concludes his other half.

For Gina Miller’s views on offer periods for mutual funds visit www.pwmnet.com

Gina and Alan Miller, SCM Private