So Porter and Hughes-Morgan started with a business plan, but they tore it up after three months, Porter says. “You can write beautiful plans and lay it all out on paper but the real world doesn’t work like that. You have to adapt. It’s important to constantly think about your business model and whether it’s still right for you,” he explains.
The independent fund house’s assets are split between 55% in hedge fund products and 45% long-only. Having a total of US$11.3bn (€7.9bn) under management, the firm also runs a multi-management business.
The firm has done well through the crisis, ending 2008 with net inflows of £1.4bn (€1.6bn) and year-to-date assets under management growing by over 30%.
Together with its affiliates it saw gross inflows of over £2.4bn during the first seven months of 2009 across its range of long-only, hedge and multi-manager funds.
The strongest in-flow generators have been the long/short global equity and the emerging market products, both of which are Nevsky funds. Nevsky is one of the Thames River Capital affiliates, together with the multi-manager business, Thames River Multi-Capital.
Thames River’s fixed income products, both global government bonds and credit and the long-only multi-manager products, have also attracted strong flows. There have also been steady investments into the recently launched water and agriculture fund.
Thames River’s Hedge + product returned an estimated 12.7% in 2009, to end of July this year and Kingsway, its long-short pan-European equity fund, generated performance of 1.36% over the same period.
Porter says: “This [the inflows and performance] has been driven by a business model which allows fund managers to focus entirely on investment: a freedom which in turn has proved extremely successful in attracting some of the industry’s brightest talent.”
The most recent appointments were to the global credit team with Stephen Drew and Simon Ulcickas joining as senior fund managers in June.
Porter says that one of the most important aspects of “doing things differently” was to create an environment that people are happy to work within.
“The biggest problem in fund management for investors is what happens when the fund manager moves. We never lost a senior fund manager to another organisation and I’m really pleased about that. It shows that the environment works for them,” he says.
Co-founders Porter and Hughes-Morgan both had experience working for large asset management firms –
Baring Asset Management and Jardine Fleming, respectively – before setting up Thames River.
“We wanted to do things better. We had seen parts of our business flooding out to hedge funds. Quite simply we wanted to poach some of the big guys from the big shops and bring them into a place where they have common ownership,” Porter explains.
In a world where fund manager incentives are central to discussions now, the common-ownership model can be seen to be beneficial both to the investment professionals and client investors.
Porter says: “Asset management is a people-driven business. The talent and value of this business walks in and out of the office every day. These businesses are essentially worth nothing except maybe the computer screens and the leases on the buildings, but not much more than that.”
Retention may be important for the Thames River business, but Funds Europe wondered what would happen to the leadership of Thames River 20 years down the line.
“At some point my colleagues will say: ‘You are completely barking mad and we don’t want you to work here any more!’ So the firm will have a new leader,” Porter says.
But the future is not being left to chance. He explains the business is currently making efforts to hire senior executives, but Porter is also determined to employ younger professionals.
“Most of what I do is driven by the experience that I have. A smart 30-year-old with seven or eight years’ experience thinks quite differently.
“You want new life and new blood coming in the whole time and when we hire, we focus on finding different types of people,” he says.
Thames River is a private company and Porter says he was delighted when the firm made the unanimous decision not to float the business on the London Stock Exchange.
“I got to keep my job,” he says, “I didn’t want to be the CEO of a public company. These businesses work better in the private sector.”
©2009 funds europe