April 2014

OPINION: The rules of elsewhere

Fiona RintoulIt was with a feeling like joy that I spotted a press release in my inbox the other day about a fund management company in Liverpool (Seneca Investment Managers) taking over another fund management company in Liverpool (Miton Capital Partners) in order to consolidate its position in Liverpool. Liverpool? I hear you cry. And that was my first thought too. But it was swiftly followed by: Liverpool! Yay! There is so much talk of diversification in the fund management industry. Diversification of assets and risks is a well-worn path. More recently, the benefits of a workforce that is diverse in terms race, nationality, educational background and gender (although we obviously don’t want too many genders) have been recognised by most people if not yet by absolutely everyone. And yet, with the possible exception of Switzerland, there is very little diversification of location in fund management. Instead everyone crowds into one city, one part of one city, one street, one – let’s face it – pretty soulless piece of real estate named after a small yellow bird. Some may argue that it’s because talent (by which they mean people who are good at their jobs) congregates in particular nodes. But everywhere where there is a population, there is talent (people). To suggest otherwise is a little insulting, it seems to me. In any case, if you are located outside, say, London, in, say, Liverpool, you have a much better chance of holding on to your talent (people). “Continuity of staff is a big benefit of a non-London location,” says Alex Dymock, chief investment officer of Seneca IM. “Our funds have a long track record with the same managers. In London, a fund with a similar track record might have gone through several managers.” Another advantage of not cuddling up in some designated financial centre with people who’re doing pretty much the same as what you’re doing is that it promotes independent thought. There’s always a lot of talk in the fund management industry about getting away from the herd mentality. Why not get away from the herd itself while you’re at it?   In fact, if you wanted to be unkind, you could say that recycling the same old talent in the same old cuff links with the same old ideas every two years or so is not an obvious path to success. And old arguments about networking and access to information are just that – old arguments. “We live in a world where there is so much access to information that the successful fund managers are now the ones who can cut through the noise,” says Dymock. If you really think about it there’s quite a lot of evidence to support the benefits of location diversification. Walter Scott & Partners, a well respected Edinburgh-based investment house, spent its formative years in a castle in Midlothian. Skagen Funds, a really rather successful large-scale boutique, ploughs a lonely furrow in Stavanger. Across the North Sea in Aberdeen lies the eponymous headquarters of an asset manager whose forthcoming acquisition of Scottish Widows Investment Partnership will catapult it from the big time into the very big time. It’s notable that Aberdeen Asset Management’s chief executive Martin Gilbert has also kept his head about the forthcoming referendum on Scottish independence while all around him are losing theirs. “There will be plenty of time after the referendum to make whatever plans or changes are necessary,” he recently told the Herald newspaper.   Such Zen-like calm. Such indifference to difference. Perhaps it’s the sea air. Meanwhile on Merseyside, Seneca IM is planning to build its business in Liverpool over the next three to five years. For the moment, it is the only fund manager in Liverpool, but who knows: perhaps location diversification will catch on. It would certainly help to rebalance our somewhat challenged European economies if it did. Fiona Rintoul is editorial director at Funds Europe ©2014 funds europe

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