Close Brothers Asset Management, part of London-listed banking and investment house Close Brothers, has moved to profit from the changing wealth management landscape in the UK with a series of acquisitions. Has it got the strategy right to be successful?
CBAM, part of UK banking and investment group Close Brothers (founded in 1878), has made a number of acquisitions as part of the evolution of its wealth management business; for example, it became full owners in January 2010 of Fortune, having acquired a sizeable stake in 2006. Other acquisitions include Allenbridge, an execution-only brokerage, and Chartwell, an independent financial advisor. CBAM now has almost 150 advisors nationally, giving it plenty of presence.
So when this publication met Nancy Curtin, chief investment officer at CBAM, it was eager to find out how far the firm had progressed in a market bracing for the start of the UK’s Retail Distribution Review programme of reforms to wealth management.
To start with, how is the firm doing in getting where it wants to be in terms of market scope?
“We might make other acquisitions,” Curtin replied, “but for now the core of the strategy is in place.”
Structure and offering
So here is how the firm works: There are three broad categories of offering at CBAM depending upon client size and preference: the Close Discretionary UCITS unit trust; the Close Tailored Portfolio Service (Direct and Multi-manager) and the Close Bespoke offering (for the wealthiest clients).
Starting with the discretionary funds service, funds are made available in an “open architecture” form – with Close Brothers’ multi-managers making the choices – and in a passive form (investing in passive instruments of various kinds), again, chosen by Close Brothers. These funds are open to clients with as little as £1,000.
Taking the minimum investment up a large notch to £250,000, the firm offers a segregated discretionary service and a segregated open architecture offering, again based on a common overall asset allocation view, but offered to clients in the form of separately managed accounts in a range of risk profiles to cater to clients’ individual attitudes to risk.
And thirdly, there is the bespoke discretionary management service for those able to invest at least £1 million, which is described by Curtin as “a completely customised discretionary portfolio solution” – it aims at taking into account client-specific income and capital growth needs and objectives and other portfolio requirements. These needs cover a wide canvas, such as liquidity, asset class preferences, legacy holdings, illiquid investments, CGT considerations and preferred currencies.
CBAM has made headway in difficult market conditions. According to a 17 May trading update, Close Brothers said that private client assets under management increased slightly to £7.0 billion (31 January 2012: £6.9 billion) at 30 April 2012, which it said reflected a rise in net new money.
Experience
As for Curtin, she came into her current job in 2010, having formerly been CIO at Fortune, which, as previously mentioned, has been a subsidiary of Close Brothers since 2006.
A New Yorker by origin, Curtin has held senior roles in asset management, private equity and hedge fund investing for over 20 years. Prior to joining Fortune (later absorbed by Close Brothers), she was managing director of Schroders Investment Management NA and head of global investments for its $20 billon Global Mutual Fund Business. She was also CEO of Internet Finance Partners, a venture capital business of Schroders, the UK firm, and had previously worked at Barings Asset Management as head of emerging markets and as a member of the European investment and asset allocation team. It is a varied resume.
Curtin was animated about her time in covering emerging markets. For example, as a senior portfolio manager at Rho Asset Management, she ran its assets across a range of strategies and developed Rho's private equity businesses in Berlin after the fall of the Berlin Wall.
So how does her work fit in with the rest of the CBAM business?
“This is a private client business and therefore preservation of capital and reduction of downside volatility is at the heart of what we do,” she said. “The goal is to generate risk-adjusted returns above inflation, and if possible, to do even better than that, she said. We have a range of risk profiled products and solutions to meet the differing needs of our clients,” Curtin said.
“Our private client focus means that we have a deep understanding for and appreciation of the fact that for our clients, the capital we manage is finite, we take our role as stewards of that capital extremely seriously. “Even for the wealthiest clients, we always have a keen eye on capital preservation,” she said.
Curtin runs the asset management side of CBAM; on the financial planning side, this work is headed up by Andy Fay. The chief executive is Martin Andrew.
Institutional strengths
“I am passionately in favour of the view that all clients deserve the discipline and quality associated with institutional investment management,” Curtin said.
“In terms of investment philosophy, we believe that all investors have a common set of investment goals: an optimal (investor specific) mix of income, growth and capital preservation,” she said.
“Asset class exposures and specific investments selected reflect a common and shared view of appropriate asset allocation and risk weightings but tailored to meet the need of different types of clients. In addition, there are three key drivers of our investment philosophy: diversification; liquidity and active investment management,” Curtin continued.
“Experience has taught us that diversification across asset classes and investments that have both good individual return expectations and low correlation with one another is an effective way of reducing portfolio risk. In addition, we consider liquidity to be a crucial variable in portfolio construction, enhancing our ability to respond to market opportunities, adjust the levels of risk and rebalance portfolios to an optimal mix of investment opportunities,” she said.
“In addition, while we have a strategic view about the appropriate mix of asset classes for clients with different risk and return objectives, we are not afraid of tactically allocating around that view in the interests of downside protection or upside capture, within agreed and monitored risk tolerance levels,” Curtin added.
In other words, be prepared to move fast when markets dictate. This firm, like many of its peers, has had plenty of experience in that regard in recent months. Judging by current economic conditions, that isn’t likely to change any time soon.