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DFM with £86m under management set to close

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DFM with £86m under management set to close

Discretionary fund manager (DFM) Strand Capital is set to be wound down by its owners. 

Strand Capital is a London-based DFM and has £86 million in funds under management and partners with over 10 IFAs, according to financial statements for the year ending 30 June 2016. 

The DFM was bought by Optima Worldwide Group in 2014 for £982,389.

Financial statements published earlier this month suggest Strand Capital has faced difficulties in recent months. It made a loss after taxation of £204,975 for 2016, compared to a loss of £17,627 for 2015.

Over the past few weeks the firm has told the Financial Conduct Authority (FCA) it will apply for a voluntary wind up. This process is expected to begin shortly.

After it told the regulator it was going to wind down, New Model Adviser® has learned it came to an agreement with the FCA to a restriction on its permissions which means it cannot dispose of its assets without the regulator’s permission. The agreement also means it cannot handle client money without or perform any regulated activity if it does not have the regulator's permission.

These restrictions are a voluntary agreement with the FCA, New Model Adviser® understands.

The reasons for the agreement with the FCA are not clear at this stage. Sources New Model Adviser® spoke to said there have been some delays in clients receiving interest payments, and there are a certain percentage of non-standard assets held in the DFM.

Last Monday the firm’s director and portfolio manager Hamilton Keats resigned from the business. On the same day, compliance expert Joseph Egerton was appointed as director of the DFM in order to help with the process of winding it down.

Egerton said he and the firm are working with the FCA to ensure the clients are not affected by the eventual closure of Strand.

‘The FCA has been fully engaged and is fully aware of what is happening,’ he said. ‘There is nothing being hidden from the FCA - we will make a more detailed statement by the end of the week.’

New Model Adviser® understands that Keats attempted a management buyout of the firm last year but this was not successful.

Egerton said the firm was being wound up because its controlling party, Optima Worldwide, no longer wanted the DFM as part of the group.

‘Hamilton [Keats] has left, the owners want it wound down and they have appointed me to act as the director for the purpose of doing it. My role is to ensure the matter is dealt with properly and things are sorted out in the best way for clients,’ he said.

Optima declined to comment when approached.

According to Strand Capital’s FCA register page, the firm has permission to ‘hold and/or controls on behalf of customers’.

The fact the firm can hold client money raises questions about potential losses for investors if the firm does go into administration and no one steps in to buy the client bank.

Egerton said Strand is currently talking with a number of other DFMs about moving clients, but nothing has been finalised yet.

Egerton said the firm is ‘enthusiastically in favour of the FCA’s requirements, because it will protect clients’ interests and will give clients comfort’.

When asked when the changes will appear on the firm’s FCA register page, Egerton said the requirement from the FCA will soon appear publicly.

The FCA declined to comment.

Strand is not the first DFM which has agreed to restrictions over its business with the regulator. Last year Beaufort Securities and Greyfriars Asset Management voluntarily agreed with the FCA to stop taking in new regulated investment money into their DFMs. 

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