Formative experiences don’t come much better than being shot at in Africa and working for Lehman Brothers at the time of its collapse. Richard Bonnor-Moris, now head of multi-asset at Newscape Capital, is perhaps unique in the wealth management world for having endured both.
Born into a nomadic military family, Bonnor-Moris left school for a gap year in Africa, at a time before jaunts abroad were a rite of passage for British teenagers. He came under fire from bandits in Central African Republic and, with a characteristic dryness describes his trip as ‘much more challenging than I thought it would be’.
His experiences in Africa made a significant impression, so much so that he lost contact with all his old friends and unlike the average 19-year-old started university ‘thinking the world was a pretty dire place’. ‘I came back quite different as a person,’ he states laconically.
Fast-forward several decades, via stints as vice president at JP Morgan private bank, and four years at Lehman Brothers until the bank collapsed, and Bonnor-Moris met Stephen Decani, an affable Australian who had set up Newscape Capital in the wake of the credit crunch.
The two bonded over a conversation about risk management – a subject which, alongside liquidity, is a preoccupation for Bonnor-Moris.
‘When I first met Stephen I had this model in my pocket which was about managing drawdown,’ he said.
‘I believed the hedge fund world was a little bit ahead of the long-only world because they spent a lot of time thinking about drawdown, which is the worst possible experience any of their underlying investors can have.’
In the days after the collapse of Lehman, Bonnor-Moris saw a photo of himself in the newspapers, as he left the building in his work attire carrying a large box. He wasn’t actually clearing his desk, rather using the fairly large sum of money on his pre-paid staff lunch card to buy up the tuck shop’s stock.
He moved with several colleagues to join Nemesis Asset Management and ran portfolios for a number of ultra-high net worth clients. After his meeting with Decani, he spied a more attractive opportunity in the start-up and came on board to construct portfolios with a focus on risk management.
‘Modern portfolio asset allocation should take account of short-term drawdown and long-term goals but to do that you have to be fairly dynamic and that’s really what we’re trying to achieve,’
‘I can understand why various organisations have had a problem with absolute return, because that’s not what I’m talking about. Risk is variable in itself and I’m talking about managing drawdown. And to do that you need to have a variable approach to risk.’
Nearly five years on, Newscape runs close to £400 million – a figure that has grown around £80 million year to date – and has 20 IFA clients accessing its model portfolio service.
The firm also runs money for institutions and has a single retail fund, although it has ambitions to launch a specialised fund range.
‘I definitely think we will be expanding. The timeline on that will be asset growth – we have a tendency to be more cautious than most,’ Bonnor-Moris says.
The firm expects to expand its staff – most likely hiring an equities specialist alongside more relationship managers to service clients. Two new funds are also in the pipeline, one of which Bonnor-Moris will manage.
Newscape’s balanced portfolio has returned 4.66% over the last year compared to a rise of 3.67% in the Apcims Balanced index. Bonnor-Moris does a fair amount of trading as a multi-asset manager, and portfolios usually include a blend of currency shorts alongside the staple equity and bond funds.
Best calls this year include going short the Eurostoxx in February before closing the trade in May, and also going long the Swiss franc.
‘One of the reasons I put that on was because I thought European Central Bank president Mario Draghi’s “I’ll do everything I can” statement would be less inflationary on markets. But you can never underestimate the triumph of hope over experience,’ he says, adding he would close the trade but for the time being he doesn’t see better opportunities out there.
‘We are trying to add risk assets that are skewed, which will provide some protection in what we imagine will be a period of volatility,’ he said. ‘But just to counter that, we’ve put in Cavendish Opportunities, Paul Mumford’s fund, which is reasonably aggressive. He’s an old-fashioned stock picker.’
Bonnor-Moris believes the economic outlook is ‘pretty dire’. He is in the deflationary camp as he is yet to be convinced that, despite the tremendous amounts of quantitative easings that have taken place, inflation can come through chiefly because the government, consumers or corporates are all deleveraging.
‘The problems with the UK were predictable and continue to be so. The fact is that maybe we are becoming more aware of that and the consumer is getting even more depressed.
‘You are not going to get inflation with the velocity of money being so very, very low. Literally, money just gets pumped into banks and it just gets kept on balance sheets.’
‘I feel as if we are going into a temporary period of deflation. At some point there will be the greatest generational opportunity since the 1980s to invest in equities,’ he said, speculating this is likely to be around two years from now.
Bonnor-Moris, who read economics at the University of Manchester with a specialisation in African politics, is less committed to pure economic liberalism than a lot of investment managers. While he is right-leaning politically, and is certainly no Communist, he has retained a strong social conscience and points to philosopher John Rawls as an influence.
‘The fact is that after 1990 we all thought Marx was a complete waste of time, but there’s a view to saying that there are problems with capitalism,’ he says.
‘John Rawls wrote best about society and how would you design society behind a veil of ignorance. He said you would maximise the least advantaged.
‘That doesn’t mean you can’t have ridiculously advantaged people, the Bill Gates of this world are a good thing because they maximise the least advantaged. You just don’t want to have people in complete poverty.
‘I think as life progresses, and certainly from my experiences in Africa, you realise that there isn’t necessarily a black and white.
‘Particularly the last five years have shown us that economics which we thought was correct may not necessarily have been so.’
Although he has JP Morgan and Lehman Brothers on his curriculum vitae, Bonnor-Moris is keen to stress he has never worked in banking.
And while it is not uncommon for investment managers to bemoan their time at large institutions and wax lyrical about their freedom at a boutique, Bonnor-Moris has no such complaints.
‘There’s a distinct difference between being in a bank and asset management,’ he says. ‘I’m not bitter at all. I think the incompetence of some bankers is crazy, but it is what it is.’
That said, he does describe the culture at JP Morgan in the early 2000s as ‘rocky’ and ‘challenging’, mostly due to the difficulty of integrating numerous acquisitions. One of the reasons he took a job at Lehmans was he felt the culture was ‘clean’, since the bank had never been acquisitive.
Lehman’s pride in having seen such tremendous organic growth, from just 20 people in the asset management arm when Bonnor-Moris joined in 2005, to over 300 at the time of its collapse, might have partly contributed to its failure, he says.
‘Perhaps that was their problem, that they were so convinced that they were right about what they were doing.’
Although it was exciting to be part of a business that had grown so much, he sensed an attitude of short-termism within the asset management division.
‘It would be fair to say Lehman Brothers never really understood the value of an annuity and what asset management is really about,’ he adds.
‘They were much more transaction-based and that was a shame. It takes a very long time to build asset management and it’s about having relationships and trust. While the culture was very smart it wasn’t based around long-term relationships, it was about the short-term.’
That he has learned from this is evident in the way he speaks of wanting to grow Newscape’s client-facing resource, but will still spend time speaking directly with clients.
‘My focus is on running the money but I spend a lot of time servicing clients,’ he said. ‘I like those things, I would probably get bored if I didn’t.’