Group set to fashion new boutiques

Jonathan Polin of Ignis sees the downturn in a positive light, saying it is a good time to build business and to this end is looking for partners to launch more ventures, writes Natalie Kenway.

Ignis Asset Management was created from the merger of Resolution Asset Management and Axial Investment Management following Pearl Group’s purchase of Resolution. The firm manages £70 billion for retail and institutional investors from its offices in London and Glasgow. As well as an
in-house fund range, Ignis has four joint venture boutiques, Argonaut, Cartesian, Hexam and Maia, focusing on individual asset classes.

Corporate activity meant 2008 was a quiet year for Ignis in terms of launching fund boutiques. However, Jonathan Polin, the sales and marketing director, is again eyeing up fund managers for the group’s next joint venture.

Pearl Group bought Resolution Asset Management in late 2007 and merged it with its own in-house asset management division, Axial Investment Management, later in 2008. A re-branding, not the first for Resolution, to Ignis was completed by November across its own fund range and those of its joint venture boutiques, Argonaut, Cartesian, Hexam, and Maia.

Polin says: “The strategy of the asset management company remains intact. We are still absolutely driven to be a key player in the marketplace and we ended 2008 in relatively good shape.

“Last year was not the year for launching JVs [joint venture boutiques] as we had all sorts of corporate activity to do and we wanted to concentrate more on the existing business. Now we are actively looking and we are amazed by the amount of available fund management talent.”

The long-term plan is to add five more boutiques, focusing on different asset classes, to sit alongside the four. Ignis has a history of attracting teams, rather than individual managers, to set up firms where each member has a stake in the ownership.

Barry Norris and Oliver Russ moved from Neptune to set up Argonaut, a European specialist firm, while former SVM managers Andrew Kelly and David Stephenson were hired to launch Cartesian as a British equities boutique. Hexam runs emerging market funds after recruiting Bryan Collins and his team from Baring Asset Management and, most recently, Maia, a multi-manager operation, was launched after Ignis poached Chris Ralph, Simon Mungall and Jason Collins from Fidelity.

Polin says another JV will be launched in 2009 but says it is too early to give details, although he did say he is looking at “fund managers who want to do their own thing rather than be part of an organisation or in companies where the ownership or robustness is not what they would like it to be”.

He also hints at which asset class it will focus on: “Over at least the next five years the market will all be about income generation. I think the credit crunch has perhaps been the saviour of asset management. All of those who have been saving for the past 10 to 20 years and have been behind the growth of the unit trust industry have seen their savings pot decimated. The ability to drive income has become more difficult and therefore the demand for this is higher than it has ever been before.”

The best performing fund from the group sits in its Argonaut boutique in the shape of £200m European Alpha, run by Barry Norris. Three-year performance figures to March 2, 2009 show it fell 14.86% compared with the Europe ex UK sector average that was down 24.3%, according to Morningstar. This ranks the fund ninth percentile.

Polin says he is “delighted” with the performance of both the European Alpha and European Income funds and they are popular with advisers and multi-managers alike.

“When everybody wants income and to diversify away from their massive weightings in UK equity income, a steady Eddie fund that produces a 6% yield is really catching people’s imagination.”

Gavin Haines, the managing director of Whitechurch Securities, holds the European Alpha and European Income. Meanwhile, Gary Potter, co-head of multi-manager at Thames River, says European Alpha is a strong contender on the reserves list for his multi-manager funds.

Haines says: “We rate the European managers and their stockpicking very highly and have used Norris ever since he was at Neptune. We will also be looking at the European Absolute Return fund that has recently been launched.”.

Indeed, the European Absolute Return fund is the most recent offering from Ignis and was brought to the market at the end of February.

The group already has one long/short fund aimed at the retail market, Cartesian UK Equity 130/30, and soft-launched American and Asian 130/30 funds, which are run in-house but are not yet marketed.

Potter is a supporter of the UK Equity 130/30 fund: “We do not think there are many decent 130/30 funds out there and Ignis is a business that understands a short book. We have had a number of meetings with the managers and understand how they manage the long and short segments almost as separate portfolios.”

Polin does not see the interest in going both long and short of the market as a short-term trend for retail investors: “One of the interesting things to happen as a result of the fallout in the hedge fund industry is the coming together of long only and hedge funds and the merging of their disciplines and tools. It was always going to happen, an evolutionary step. Ucits III powers have enabled it to happen and market volatility has been the catalyst.”

He also says that other absolute return or 130/30 products will be brought to the market once he feels comfortable that demand is there.

Ignis may also bring products to the retail market from Axial, which mainly runs fund of hedge funds and credit products, but are not in a suitable format.

“Where they have capabilities or products that are suitable for the adviser market we will deliver them through the Ignis distribution machine,” adds Polin.

Other funds that have done relatively well in the Ignis range include the UK Property fund, which is ranked fourth out of 16 funds in the Property sector over three years, Smaller Companies, European Income and American Growth.

Polin says George Shaw, the manager of the property vehicle, has done well from being “hugely conservative” with the portfolio by holding cash and well-diversified, bricks and mortar assets, not property shares.

Haines says Whitechurch does not hold any UK commercial property but adds later in the year, when yields begin to look attractive, he will look at property again and considering Ignis’s relatively strong performance, it will be one he considers.

In February an onshore version of Hexam’s Global Emerging Market (GEM) fund was launched to widen ­distribution, but the fund is already well supported.

Elliott Farley, a senior analyst at T Bailey, has invested since October 2008: “Collins is a very passionate and very experienced manager in this area and after carrying out due diligence in this region, he was highlighted for fund selection. He uses a best ideas, high conviction approach which we like, combining bottom up with top down.”

One fund in the range that has not been doing so well is the Ignis Global Growth vehicle. It is ranked 100th percentile over three years losing 43.08% compared with the Global Growth sector average fall of 24.91%.

Polin says the manager, James Smith, made a few wrong asset allocation calls but, although the fund is open to retail investors, it is primarily used for internal money.

Other funds that have struggled in terms of performance are the trio of vehicles in the Maia range. All three, MM Balanced, MM Cautious and MM Growth, have failed to beat the sector average performance over the past year but assets under management have grown to £90m.

Polin says: “Maia was launched in a difficult marketplace, in October 2007, which was effectively the eye of the storm. Last year was not a good year and it has been difficult for the managers to differentiate themselves in the multi-manager space that is overcrowded. But this is something we want to do and we are much more driven to make sure the performance is consolidated and strengthened.”

Reflecting on the past year, Polin says 2008 was positive for the group but adds any asset manager that says it is unaffected by the downturn is “lying”.

“I actually really like this market environment. It is the best time to build a business when we are near the bottom of the market. Everyone is looking for a new story and the peer group is shrinking into its shell. In corporate terms I think we are going to see a huge amount of consolidation. This sector had huge over-capacity at the height of inflows so now it is very significant.”

He adds that larger finance houses have begun to realise that asset management is no longer core to them and have started to shed off these parts of the business. This trend was seen at Credit Suisse and Société Générale Asset Management (SGAM). Polin expects many more such businesses will be put up for sale creating opportunities for stronger ­businesses.

When asked if Ignis could be a potential buyer, Polin responds: “We are very open-minded. Most importantly we want to deliver and develop the current strategy but where there are opportunities that will fit in the with the organisation and make economic sense we will consider them seriously.”

Ignis Asset Management's fund returns over one and three years

Best over three years: Ignis Argonaut European Alpha

Worst over three years: Ignis Global Growth