Boutique house aims for low-risk rewards

Stephen Bailey, managing director of Walker Crips Asset Managers, is questioned by Will Jackson.

Q: What is the history of Walker Crips?

A: Walker Crips Weddle Beck was established in 1914 as a private client stockbroking house. We have now diversified into asset management and since 2002 have been running unit trusts. I have been with the firm since 1987 and my co-manager, Jan Luthman, who is ex-Perpetual, has been with us since 1999.

We are fully listed on the London Stock Exchange, with a market cap of about 50m. The group’s funds under administration are in the order of 1.4bn and the unit trust business is about 215m. Most of our assets are in the advisory, rather than the discretionary, business, but this is changing rapidly. Unit trust assets are up by about 150% over the past year.

Q: How is the company structured?

A: The plc is the group holding company and the subsidiaries sit beneath it: asset management, stockbroking, financial services and corporate finance. The financial services division is dominated by London & York, a York-based wealth management firm that we acquired in February 2005.

It has particular strength in self-invested personal pensions [Sipps] and small self-administered schemes [Ssas]. Asset management is our unit trust business and we have five in-house trusts. This is in addition to the Collins Stewart fund [UK Equity Focus] we run, which is an offshore mirror of our UK Growth fund.

Stockbroking encompasses advisory, discretionary and execution-only, as well as Pep and Isa management. Corporate finance acts as adviser to a number of small-cap quoted companies. These are firms with caps of less than 50m, including Aim.

Q: What products do you advise on?

A: We advise on equities, bonds and collective investments.

Q: How many managed funds do you run?

A: We have two multi-manager funds: Global Growth and Select Income. Both were previously listed under London & York. These have now been rebadged, effective from April 1. They are both managed from York by Andy Tuck.

The other three funds are smaller and less high profile at the moment. UK Growth, which has 150m in assets under management, aims to achieve long-term capital growth through UK-domiciled equities. It has received a great deal of attention from investors.

We are also looking at launching a product in the fourth quarter of this year. This will be a high alpha, best-of-breed version of UK Growth. The portfolio will be much more concentrated, with about 35 to 45 stocks. UK Growth has between 75 and 85 holdings – 79 at the moment.

The second fund is Equity Income, which has 34m in assets. This fund is quite interesting as it will be celebrating its third anniversary in October and, with three-year performance, it will start to hit radar screens. It has been second in its sector since launch.

We also have the Corporate Bond fund, with about 10.5m in assets. Annual management charges for the two equity products are 1.5% and the bond is 1%.

The multi-managers are charged at 1.25%. The fund we run for Collins Stewart also has a performance fee, specific to this product. All of the funds have a minimum investment of 1,000.

Q: How do the portfolios vary in terms of risk?

A: The Corporate Bond fund is our lowest-risk portfolio, in theory. Some people say all forms of equity investing are high risk but I don’t. UK Growth, for example, has outperformed in both bear and bull markets.

We like to add performance without attracting additional risk and fund volatility is extremely low. That said, most equity investors should be looking at a medium to long-term investment horizon.

We minimise volatility in a number of ways. This includes limiting individual stock holdings to no more than 5% of the portfolio. It is a moveable feast. In the bear market of 2002, we had a self-imposed limit of 3%. It gives us diversity and limits the impact of any negative stock-specific news.

Q: Are you able to use research for both your advisory clients and for unit trust allocation decisions ?

A: There is a correlation. The asset management division influences stock and sector allocation for the discretionary and advisory businesses.

We do not have many people on the research side, there are just two of us. There is a lot of third-party research available but we only occasionally cross-reference what we think with external sources. We do not believe in being held to other people’s ideas.

Our asset allocation model and our whole investment philosophy is driven by macroeconomic issues. We look at the hard economic data and evaluate it to inform our decisions. It is a qualitative, rather than quantitative, process. We are great believers that quantitative work can be done by a computer.

Q: Who do you distribute your funds to?

A: We distribute to retail investors internally. Our products are also available to retail investors through IFAs, discretionary fund managers and multi-managers.

Q: What is your main client base?

A: It is hard to say. We distribute in a number of ways but I could not point to a particular sector. We are talking to a number of platforms and wraps.

It is the way forward and the key method of distributing funds at the moment. We have been on Transact for quite some time and it has been beneficial.

Q: How much impact will A-day have on the business?

A: We expect London & York to be a huge beneficiary because it is a specialist in Sipps and Ssas. It also has its own Sipp product called Ebora, the Latin name for York. It was the rationale behind the acquisition in the first place.

Q: What are Walker Crips’ business objectives for the rest of the year?

A: We are intent on maintaining performance and outperforming our benchmarks, in the hope that this will lead us to gather further assets. The key to running money is performance – one follows the other.

We do have targets but as we are a quoted company in a closed period, I would rather not put a figure on it. Apart from the new high alpha fund, we have no further products in the pipeline.

But we will be sticking to the UK, rather than becoming a “Jack of all trades, master of none”. There are no plans to increase our marketing. We are not big enough to compete with companies like New Star and Jupiter in this way. We are a genuine boutique and we like to think that our performance will attract investors, rather than our marketing.

Walker Crips Weddle Beck has provided stockbroking services since 1914. The group has 25,000 private clients, with 1.4bn in funds under administration. The business consists of stockbroking, corporate finance, asset management and financial services subsidiaries. The asset management division has 215m in assets, across a range of five unit trusts. This includes two equity funds, one bond fund and two multi-manager portfolios, run from York.