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Gars in their eyes: the challengers coming after the SLI giant
by Eleanor Lawrie on Jul 10, 2014 at 07:15
‘People now might look at SLI and think it is getting a bit big. There are some markets it can’t operate in as effectively because of its size,’ he said.
Harley added that the huge success of Gars, coupled with its large size, could compel investors to look for the same model elsewhere.
When it comes to its rivals, he highlights that SLI has done a good job of firmly establishing the concept of a multi-strategy absolute return offering.
‘It has taken several years because they had not done it before, but the expertise is there now. It won’t take them several years [to establish the rival offerings]. What is interesting is the quality of the ideas that get into the portfolio,’ he said.
‘The Gars team have been working together for a long time and there are a large number of people contributing to that process, so the risk with these product launches is idea flow. Where are the new ideas going to come from, and to what extent are people incentivised to contribute to the process?’
While Charles Stanley’s Shauna Bevan believes there will be continued appetite for absolute return launches, she warns these types of strategies could face a liquidity crunch.
‘One concern is the derivatives are provided by a small number of investment banks and you could question whether there is enough liquidity in the market, assuming they were all to launch Gars-like products,’ she said. ‘There is definitely the demand, but there will be a capacity issues on some level.’
Bevan added that she welcomes the launch of other strategies, as they give her research team more choice in an environment where clients want low volatility returns.
‘Along with our peers we are looking for ways to mitigate equity risk. From a business point of view it makes perfect sense to launch a rival to Gars, which is a perfect asset gathering machine,’ she said.
It is clear that the appetite for taking a bite out of Gars’ £20.6 billion legacy shows no signs of abating, and it is unsurprising that rival investment houses want a piece of this lucrative trade.
However, much will depend on the quality of their execution, their resources and ultimately whether the juggernaut that is Gars can continue on its trajectory.
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