The new management team at Signia Wealth have been quietly going about their business, restructuring the company and putting it on a sounder financial footing since they rejoined in March.
Managing director Carnegie Smyth, chief investment officer Etienne de Merlis and Greg Malone, head of wealth management, returned to the boutique after the acrimonious departure of Signia’s co-founder and chief executive, Nathalie Dauriac-Stoebe, in January.
Along with Michael Rosenthal, head of hedge fund investments, they form the new executive team as the company looks to draw a line under recent events and position for the future. The quartet have maintained a stoic silence while negative headlines continue to swirl around Dauriac-Stoebe’s ongoing legal battle with Signia backer and billionaire Phones 4u founder John Caudwell over her exit.
Caudwell, whose Grecco vehicle owns a 51% controlling stake in the firm, has subsequently given his public backing to the new management team, but Smyth and crew prefer to keep their heads down and focus on the job in hand.
‘It is no secret there are some legal issues that are still to be resolved,’ Smyth says. ‘But John Caudwell is backing Signia and we are very pleased about that. It was never his intention to be well publicised with the business, and you won’t hear any of our management talking about him.
‘It’s great that we are backed by a number of high profile individuals and it was a big catalyst for us returning.’
In its first four years, the business saw a string of highly public departures, including head of wealth structuring Martin Wilson in January and former SGPB Hambros CIO Martin O’Hare, who served as head of investment solutions, in July 2013.
The likes of O’Hare, and Martin King – a high profile hire to spearhead a Midlands launch – have since retreated to big institutions, with the former joining JP Morgan Private Bank and the latter Tilney Bestinvest.
Smyth, de Merlis and Malone left Signia together in early 2014 after having all worked at Signia for several years since its launch in 2010. They set up their own boutique, Squared Investments, which provided a range of wealth services to entrepreneurs. So why did they leave and what prompted their return?
‘At the start of last year I decided that I wanted to move on for various reasons. One of the main ones was that I wanted to do something entrepreneurial,’ Smyth says. ‘I went to university with Greg. We discussed it and knew the challenges involved, but he felt the same. It was the right time and I was lucky that two other people [de Merlis being the third] felt the same way.
‘Setting up Squared was a very big decision for the three of us. Greg and Etienne are both married with kids and it was a big decision to go it alone, but we enjoyed every minute of it.’
Smyth says he is proud of what Squared achieved in its short life. The business was ultimately reversed into Signia and is still being held as a viable brand and conduit of future business.
The term ‘boomerang employees’ appears to be the business phrase du jour and the pros and cons of firms rehiring former employees are hotly debated. But after conversations with Signia’s backers, who were looking for new management following Dauriac-Stoebe’s departure, the trio felt that the ethos they had put together at Squared could become the blue print for a rejuvenated Signia.
‘At the turn of the year, we had some great successes and were building Squared Investments quicker than we thought we would. But we lacked infrastructure, buying power and support staff,’ Smyth says.
‘We got approached by a large family about putting significant working capital in place. We were also approached directly by Signia, and I spoke to the people here about seeing if there was something we can do together.
‘I knew how talented the people are here and what the infrastructure could be. I felt that if we put the culture and ethos together, with Etienne running the money, we would have a very powerful business much quicker than we could at Squared. We could accelerate the growth and work with people we trusted and liked, and we knew the clients.’
Smyth says in the end, the transition for the returning trio proved ‘easy’ as the staff quickly bought into their ideas. The management team had three key priorities: implementing the culture and de Merlis’s investment process; restructuring the firm to cut costs and improve corporate governance; and meeting existing clients to outline their plans.
‘The culture is more testament to the team than the management. They were all here when we came back and it wasn’t hard to put in place,’ he says.
‘It’s not because we are doing something radically different, it’s more that the team is allowed to deliver. That trust works both ways and the culture is derived from that. It’s important for a business that you trust your team and we trust them and they have bought into what we are doing.’
De Merlis reorganised the investment team, implementing his global multi-asset approach. The cultural shift means that all of the analysts are now given the responsibility to generate ideas and go out and meet third party fund managers.
They are also challenged, being asked to present on different asset classes, which is designed to broaden the analysts’ knowledge and ensure the fixed income and equity specialists, for example, operate more as a team rather than in their own silos.
These key changes then had to be communicated to their existing clients, which saw Malone and de Merlis rack up the air miles.
‘One of the big things we did when we came back was going out and meeting every client. This was led mainly by Greg and Etienne, who were getting on planes and going round the world,’ Smyth says.
‘It wasn’t hard communicating the changes and most of them bought into it. It’s not just a management change but the investment philosophy, and it was important to tell them why we are doing what are doing.’
Meanwhile, back in the office, Smyth and the team were stripping cost out of the business after Signia reported a £3.1 million loss in the 2014 calendar year. He says much of this was down to a significant fall in non-core revenues, such as lending and private equity, rather than investment management fees, but costs had also soared to £7.9 million, virtually the same as its revenues.
The new management has been in situ since March, so just over two quarters, and since then, says Smyth: ‘Month-on-month we have broken even or made a small profit, before certain exceptional costs.
‘We’ve increased revenues – core revenues are up 18% for this year, assuming we have no new clients and don’t lose any.’
He says the restructure saw a slight reduction in headcount to 25 and the firm ditched the second floor of the Marble Arch office it rents, which had never been used. Along with a reduction in other non-essential costs, ‘over £2 million of expenses’ have been stripped out of the business.
‘It is a turnaround and it is now about growing the top-line. The real challenge is to move into the growth phase,’ he says. ‘We believe we’ve got a fantastic platform, we have separate functions for risk and investment, the fund research team and Michael.
‘In terms of the structure of the business, we have the pieces in place. We will hire a couple more client-facing staff, but we are in no rush.’
One of those pieces was the hire of two non-executives, a first for Signia, designed to underline the company’s commitment to corporate governance and transparency.
Paul Lester CBE, the former CEO of shipping group VT Group, was named chair in January with former KMPG partner and UK vice-chair Derek Zissman appointed non-executive director the following month. In time, when the legal battle with Dauriac-Stoebe is resolved, Smyth says the intention is that there will be a management and full staff buy-in, with everyone offered the opportunity to become a shareholder in the business.
However, one area where Smyth is less comfortable with transparency is around the charging structure and the firm’s assets under management (AUM), which reportedly reached £2.3 billion under the previous regime.
It is also unclear how much of the firm’s total AUM is Caudwell’s money and what percentage is from external clients.
‘I believe our type of business should be very discreet. There is a fund charge, we never quote assets under management and I don’t think our clients would like it if we did. They want to know that the business is growing and I hope we’ll be talking about that,’ he says.
He is upbeat about the firm’s potential, pointing to several avenues to growth. Central to this are Malone and the private client team’s network of professional connections, which is a core source of new business.
‘There is a lot of potential new business right now. We are seeing new liquidity events in the market. There are a lot of entrepreneurs out there,’ Smyth says. ‘We’ve got the relationships in place with the institutions and for a lot of these entrepreneurs, it will be the first time they’ve needed this service.
‘With some, we are pitching now because we know they are selling their businesses next year. If the markets are ripe for IPOs and M&A, it is fantastic, and that’s why we’ve spent a lot of time building those professional connections.’
He also points to Rosenthal’s hedge fund, which has now got a one-year track of record and performed strongly, as another potential growth area.
The firm recently held the new team’s first client breakfast recently, and client introductions and private equity are expected to gather momentum.‘We are very focused on getting the core pieces right, especially this year,’ says Smyth. ‘Then we can look at more niche things, like some of the plans we have with Squared Investments under the Signia umbrella.’