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JO Hambro Capital boss stands firm in fund price war

JO Hambro Capital boss stands firm in fund price war

JO Hambro Capital Management (Johcm) chief Gavin Rochussen (pictured) is refusing to bow to downward pressure on fees at a time when platforms are unveiling cut price rates from competitors.

‘In the whole negotiation with platforms we hold our pricing,’ Rochussen said.

He added that Johcm is the only fund group to charge a performance fee on Hargreaves Lansdown’s platform, which recently unveiled its unbundled charging structure.

‘Our view is if we focus on performance, we need to keep a close watch on capacity, because volume destroys performance. And the quid pro quo is if we are running smaller capacity funds, we want the outperformance and that is how we justify the performance fee,’ he said.

Although Citywire AA-rated manager Clive Beagles’ £2.5 billion Johcm UK Equity Income fund is closed to new investment, Rochussen says it is still attracting flows from existing investors, and saw a pick-up after the news broke that Neil Woodford is to leave Invesco Perpetual.

‘Hargreaves has made it absolutely plain they don’t like performance fees, but they can’t avoid putting ours on there because it’s such a good fund,’ Rochussen said.

However, he added that the firm has a good working relationship with Hargreaves. ‘They respect what we do and we respect what they do. Our business models are different. They are volume-driven, we are capacity-constrained and we have got to find a way of working with them. And the same applies for the other platforms.’

Looking to the US

Elsewhere, Rochussen views the US market as a growth area, having spent 2013 building distribution in the region. The company is still hunting for a US asset management team.

As with all other areas of the business, performance will be a key factor.

‘They will earn what they make in performance. It’s a very different ethos and culture to a Fidelity for example, where they are all on a basic salary and they get a discretionary bonus,’ Rochussen said. ‘Here the compensation schemes are very transparent. If they have a bad year, there is no place to hide.’

This endorsement of performance fees is borne out by the company’s strong track record.

In the year to September 2013, assets under management doubled to £11.9 billion. Twenty one quarters of positive flows helped create net inflows of £1.9 billion, while post tax profit increased by 120% to £29.3 million.

‘We had a phenomenal year last year for performance,’ the chief executive said. ‘I would like to try and match it and make sure every fund beats its benchmark every single year. If you are beating your benchmark every year in the long term, that’s a very powerful performance record.’

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Clive Beagles
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50/82 in Equity - UK Equity Income (Performance over 3 years) Average Total Return: 39.22%
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