JO Hambro Investment Management, the firm founded in 1986 and now owned by Credit Suisse, prefers to do one thing and do it well. It has no plans to expand outside of its discretionary investment niche, but intends to strengthen the business in an area where there are already plenty of opportunities for growth.

JO Hambro Investment Management, the firm founded in 1986 and now owned by Credit Suisse, prefers to do one thing and do it well. It has no plans to expand outside of its discretionary investment niche, but intends to strengthen the business in an area where there are already plenty of opportunities for growth.

“First and foremost we are an investment house; this is the distinction between us and private banks,” says Hugh Grootenhuis, the firm’s chief executive, talking to WealthBriefing about the way his firm is doing business in a time of much change in the industry.

JOHIM’s focus is exclusively on investment managers: it doesn’t have relationship managers, and clients speak directly with their investment manager. It employs around 24 investment professionals to run private client portfolios; added to this are around 80 back office staff, with all employees based at its St James’s Square office.

All the £3.3 billion (around $5.2 billion) in assets the firm manages are discretionary, with the bulk of them held in portfolios of high net worth individuals (roughly 80 per cent are private client assets, with the remaining 20 per cent held in its funds business).

Despite the segregation of the firm into two business lines, there is very much “one investment process”, according to Grootenhuis. To this end, JOHIM encourages staff to share information informally. For example, after a company visit an IM will send an email around the office, and will even know which other IMs hold this stock for clients and make sure they are up-to-date. The emphasis is on a collegiate environment, something which can be fostered given the firm’s relatively small size.

There are formal processes to streamline the use of information, such as the weekly stock selection committee, but it is often the informal channels that are the most important, says Grootenhuis.

The business model is simple: the IMs manage their clients’ money using an open architecture model (there is no obligation to use JOHIM funds) as well as their client relationships.

There are of course attractions to going the other way, says director Stephen Browne; that is, of having relationship managers and a sales- and product-driven business. For example, in a larger institution the focus might be on the sales team selling products the investment bank has created. This model is easily scaleable and delivers economies of scale, but as Browne points out, came unstuck in the credit crisis.

“The other model is scaleable and product-driven but comes with caveats,” he says.

The other approach – the boutique approach – has to be led by investment managers. In the case of JOHIM, each manager has between 50 and 60 clients, and the largest investment manager oversees around £400 million in assets. This clearly puts a limit on the assets the firm can manage with a given staff headcount, and might push up the client: staff ratio compared to competitors operating under a different model.

However, the fees are in line with the industry, and lower in some cases because the firm invests largely in direct equity-driven products with fewer layers of charges, says Grootenhuis. Management fees are 1.2 per cent up to the first £1 million and 0.7 per cent thereafter.

But the model also raises questions over growth: how scaleable is it, and how big can you get while maintaining the cohesion among staff the company boasts? It is a balancing act, of maintaining some capacity to take on assets, but not too much as it is a cost, says Grootenhuis. In an indication the firm is more in need of picking up staff than assets at the moment, it has two hires lined up to be announced in due course.

There is also movement of clients within the business, something private banking teams may find hard to understand. This might be the case, for instance, when you have a generation change at the head of a family, and a different investment manager becomes more suitable for the new key member’s investment goals. The ability to do this comes from the “collegiate” as opposed to team-based approach. The remuneration system helps: bringing clients in to the business is rewarded whether or not an investment manager goes on to manage that client.

The bulk of money in the industry is still managed by the big firms: Barclays Wealth, Merrill Lynch, Schroders, for example. But the firm says the clients it sees migrate tend to come from the big players rather than rival boutiques. Part of the problem with large wealth managers attached to private banks is that in the past the private client business was perceived as the “poorer cousin” to the investment bank, says Browne. An example of a client experience might be selling a business with the investment bank, which offers a top service, and then being moved over to the high net worth business, and not being so satisfied.

This is something that might be changing though. Barclays Wealth, for instance, has announced a large injection of investment to its wealth business, and clearly sees this as a priority now.

And the investment firm is, of course, owned by a big player itself. However, Credit Suisse is a private client business and understands the importance of this segment, says Grootenhuis. Furthermore, despite being owned by the bank for the past ten years, JOHIM has retained a distinct brand and management style.

In terms of the linkages between the two companies, Grootenhuis reports to Credit Suisse’s office in Canary Wharf, and attends quarterly board meetings there as well as maintaining informal contact. JOHIM can be a source of investment management for Credit Suisse’s clients, especially in the equities space, while the bank can provide products to JOHIM’s clients. But the firm is keen to emphasise it is under no obligation to push its parent’s products.

This focus on client service helped the firm come through the crisis well, and it was actually in receipt of client cash when investors were at their most nervous, says Grootenhuis. Other institutions which maintained a “safe” reputation benefited in this period, notably the highly-conservative C Hoare & Co, which saw deposits increase by 16 per cent in 2008.

Grootenhuis adds that one of the bonuses of each IM having a manageable amount of clients during the crisis was that it was easy to contact them and talk directly. After troubles hit in 2008, a lack of communication at the time was one of the main criticisms leveled at the wealth management industry.

“We were very quick to ring up clients, which you can do when you’ve only got 40 to 50, and you understand what they’re invested in,” says Grootenhuis.

So moving forward, the firm largely intends to keep doing what it’s doing: juggling client and employee growth in a way it can deliver the service it wants to be associated with its image. On the topic of acquisitions, JOHIM’s CEO says “never say never”, but is wary that with a strong culture integration is hard.

This also affects the way the firm looks at hiring; it focuses on hiring individuals, regardless of the clients they bring with them, and not teams.

“If they’re good, they will build a client base,” says Grootenhuis, adding that if you’re distracted by focusing on poaching clients you may not end up with the best investment managers. As such, the firm factors in zero assets for new employees, logging them as a pure cost.

The emphasis on individuals as opposed to teams also comes down to culture.

“It you acquire a team of people…it might not fit in,” says Browne.

There is a temptation to offer services such as financial planning, but as Grootenhuis points out many of these businesses are the ones who recommend JOHIM to clients, and it doesn’t intend to tread on their toes.

“We don’t need to be all things to all people,” he says.

“It is scaleable. We want to grow, but in a measured way,” says Browne.