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Profile: Thesis' road to growth following its MBO

Profile: Thesis' road to growth following its MBO

James Nield is no stranger to preparing for important tests, a skill that will likely prove invaluable soon as Thesis Asset Management begins to accelerate its growth plans.

‘I am a bit of a sucker for exams and things,’ says the Chichester office director.

Nield remembers having ‘a curious sort of enjoyment’ taking the qualifications when he moved from institutional stockbroking to private client wealth management in 2014.

‘I had to do those exams off my own back, on the train in the morning on my way to work and again on the way home, in the evening when the baby had gone to bed and all this stuff.’

This kind of work ethic earned him a distinction in one of the City papers, a fact he is justifiably proud of.

Now he can put his skills to work preparing for the next challenge: life after the firm’s acquisition.

In June last year, Thesis’ managing director David Tyerman, and Stephen Mugford, head of the company’s fund administration subsidiary Tutman, launched a £47 million buyout. They received cash backing from a consortium of private investors led by family office J Leon and a private equity partnership called Ventiga.

Since completing the buyout in July 2017, it has not been plain sailing for Thesis, however, particularly since the start of this year.

January saw the high profile resignations of its Guildford office head John Devine alongside client director Kate Nathoo and a regular fixture in the Wealth Manager Top 30 under 30, Sam Lansdowne.

Both Devine and Nathoo joined rival Charles Stanley’s Guildford office. Lansdowne found a new home at Seven Investment Management. 

More recently, Greg Dalton, chief operations officer (COO), who had been working with the wider team to help realise Thesis’ growth plans, also left business.

Nield himself was not keen to talk about the leavers as they range beyond his office, adding only that people leaving is a rarity.

‘All I will say on that is people come and go from time to time, as it happens at Thesis they do not come and go very often.’

Instead, what he is focused on is what the change in ownership means for the business and the opportunities it provides. 

Although on a day-to-day basis, not much is different, in Nield’s opinion, the new structure gives the management a chance to push the business forward.

‘What it has enabled us to do already, bearing in mind it is less than a year since the transaction was completed, are some things that we’ve been keen to do for a long time and have been unable to do.

‘The previous shareholders were very supportive. Without them we would not have a business, but they had a slightly different angle on things to the new ones, [they were] more motivated by dividends. The new shareholders are more growth-oriented.’

Nield notes the business has now started more proactive capital spending, which would not have been possible previously.

The most notable example of this was at the start of the year when the firm acquired a Bath-based discretionary investment manager Cambridge Fund Managers, which has around £30 million in funds under management, for an undisclosed sum. The acquisition is part of a wider strategy to buy up small discretionary fund managers (DFMs).

Nield says this was a fairly opportunistic transaction, but the business is actively on the hunt and in some cases in talks with other DFMs.

Given the firm’s regional presence, with offices in Chichester, Brighton, Guildford and Lymington, the targets Thesis is looking at are predominantly in the south. However, it is by no means ruling out firms based further afield. 

On a smaller scale, Nield is starting to feel the changes in his own office.

The increased capital spending will allow for the refurbishing of the Chichester office, which at 70 members of staff is currently at capacity.

Aside from the fringe benefits of a more modern office, Nield states it will give them the space to grow in terms of headcount.

This has allowed Nield to put his team into what he describes as ‘growth mode’ and the firm is currently advertising for another manager to join the office. 

Presently, Nield’s team consists of two managers, himself and Robert Clough, as well as two assistant managers, one investment assistant and a secretary.

The remainder of the 70 members of staff account for the fact Chichester also serves as the wealth manager’s head office.

Thesis has approximately £14.2 billion of funds under management and administration, of which £3 billion is in discretionary.    

Nield’s office runs just over £300 million and he notes that assets have grown since Clough joined the team last year. Nield and Clough split the assets roughly between the two of them running £150 million each. Bespoke clients have on average £700,000 in investable assets.

‘Yes, assets have grown, but there is a chicken and egg thing here. The headcount does not necessarily mean assets, but what headcount can mean is outward-looking managers and outward-looking members of staff can devote a good amount of time to outward-looking activities as well as looking after existing clients.’

What they are not doing, Nield highlights, is joining in on what he brands a theme in wealth management of separating relationship managers and investment managers, which he sees happening most notably in the bigger banks.

‘We think managers should be looking after client portfolios as well as client relationships.’

He says there is no better way to fully understand what is going on in a client’s portfolio and why it has performed the way it has.

‘We are all immersed in it, which I think gives you a level of knowledge and feel for what is going on in client portfolios that would be hard to replicate.

‘I know that there is a theme that has become a bit commonplace in the market, so we are not doing that, but it does necessarily mean we need to have more people to look after a similar number of clients.’

It is worth noting that when it comes to the firm’s model portfolio service managed out of Guildford, he puts on the hat of relationship manager.

Nield says: ‘We have not gone down the relationship investment manager route, both Robert and I and all of our managers are named managers on all of our model portfolios and unit trusts.

‘We all follow the same process and the model portfolio guys follow the same process as the bespoke portfolios. So every manager who looks after bespoke clients is equipped to talk about the model portfolios because the composition will be the same as the bespoke clients they will be looking after.’

This way, anyone who meets with a client is part of the investment process and can discuss it easily. Speaking of which, Nield says that although long-term performance has been strong, however, this has been hampered in the last couple of years by the risk-off positioning across strategies.

The Thesis Optima Balanced fund, for example, has returned 25.92% over five years compared to the FTSE UK Private Investor Income TR GBP return of 36.7%. Over one year the return is 0.6% compared to the 1.5% returned by the benchmark.

‘With hindsight, which is a beautiful thing, obviously, we went a bit risk-off a bit too soon. Frankly that is a decision that we stand by.’

In his view, investment managers need to focus on two things: one is making returns for the client and the other is managing risk.

However, he argues that in times of a continued bull run, like we have seen in the past few years, risk can fall to the back of investors’ minds, but Nield believes it is part of his job to rein it in.

‘We had the sense to forego, potentially, a little bit of upside to protect quite a bit of downside. That is a decision we actively took so necessarily it has meant we have lost a little bit of performance in 2016 in particular.’

However, Nield has been trying to reverse this by buying the dip at the start of the year.

‘We put a bit of risk back on when we saw the pullback in markets at the end of January and February.’

During this risk-off period, the average cash weighting in his portfolios was 10%.

‘We put about half of that to work and quite recently markets have rebounded pretty strongly so we’ve managed to capture some of that.’

Nield says his equity expose is now broadly neutral.  

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