Boutiques come out of the shadows

SVM Asset Management cashes in on a renewed interest in smaller players, as investors seek fresh ways of preserving their capital during the economic downturn, writes Tomas Hirst.

While it must be acknowledged that these are short- term performance figures, the volatility in the market since the start of the year has proved a challenge for most managers and in that light the performance of the fund has been laudable.

McLean says at present the managers are seeing a lot of opportunities on the short side but much of the pessimism over British equity markets is overblown. In fact, he says, with large cap companies sitting on capital there is a possibility that acquisitions could provide the leg-up for equity markets that investors are looking for.

“The emphasis has very much been swerving away from Britain towards global funds but I think the pendulum will swing back a bit,” he says.

“It’s probably the first cycle I’ve seen where global market movements correlate with the release of macroeconomic data. You can’t pick stocks on that basis so individual company analysis will have to come back in, and large companies that have access to finance will be supportive of M&A activity.”

McLean remains cautious over developed market banks, where he sees some significant risks remaining, but on the macroeconomic climate he is relatively bullish and says America’s Federal Reserve has strongly indicated its intention to prevent a double-dip recession.

Given this outlook, one might expect to be hearing a lot of positive marketing messages coming out of SVM. Bringing its investment message to the retail market, however, has been one area that the group has so far been lacking in, says Thames River’s Potter.

“It’s an interesting group and they’re going in the right direction but they’ve got to be clear about what they stand for,” he says. “It’s all very well having good products but you have to tell people about it. It’s not a group that’s well known outside the large multi-managers and creating that distinctive identity should be a core focus from here.”

That UK Opportunities, the largest fund in SVM’s open-ended range, is now £62.58m in size suggests there is certainly plenty of room to bring in further capital. As some of the recently launched products reach their three-year anniversaries next year, this may provide an opportunity to raise the profile of the products and the group to the wider retail community.

Another aspect that the group might choose to focus on with the advent of the Retail Distribution Review (RDR) is the closed-ended fund range it boasts. These include the SVM Global Fund, the SVM UK Active Fund and the SVM UK Emerging Fund.

Under the RDR, advisers will be required to show that they offer whole-of-market knowledge to their clients. This will include unregulated collective investment schemes, all investments in investment trusts, structured investment products and other investments that offer exposure to underlying financial assets, but in a packaged form, which modifies that exposure compared with a direct holding in the financial asset.

Because of this, greater attention could be pushed onto the closed-ended fund industry as some advisers who have traditionally considered their investment universe to consist only of open-ended products are forced to broaden their scope.

Whatever proves to be the case, SVM is sitting in a solid position but one that it needs to build on in order to make a bigger impact on the retail market. While investors are often reassured that a company is prioritising investment discipline over marketing, the wealth of choice means that quiet achievers can often be overlooked in favour of louder competitors.

McLean appears to be aware of the need to work in partnership with big players in the industry in order to get SVM’s message heard. SVM’s funds are already included in Skandia’s European Best Ideas, UK Best Ideas and UK Strategic Best Ideas portfolios.

“We’re working very closely with Skandia on the European side,” he says. “We also think there’s some money from segregated accounts that might be coming into the UK Growth fund.”

Whether the ambitions of the group are met will largely depend upon the ability of the managers to keep performance competitive and the marketing department’s ability to use solid performance to raise SVM’s profile.

If these conditions are met, there should be few barriers to it continuing as part of the much-heralded boutique age.

* October 25 update. Hargreaves Lansdown reinstated the SVM UK Opportunities fund to its Wealth 150 list of recommended funds three weeks after its removal following a further meeting with SVM.