Asset Management: Martin Currie proves sizeist critics wrong

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By:
Helen Avery
Published on:

Fund managers with medium-size AUMs can be successful.

The ability of medium-size fund managers to run profitable and successful businesses has always been questioned, but Edinburgh-based Martin Currie is bucking the trend. The active equity manager has just celebrated a record quarter in new business. Assets under management increased by $2.5 billion so far this year, taking the total AUM to more than $22 billion. And every mutual fund performed in the top quartile.

The growth of Martin Currie has been impressive. Five years ago, the specialist active equity manager had a dependence on two principal strategies. Over the past three years, however, the firm has tripled its spending on the investment side of the business and doubled its spending on sales and marketing. It now has seven key strategies that are available in separate accounts, and through its OEIC and Sicav mutual fund range. It also manages seven long/short hedge funds.

There are satellite offices in London, New York and Shanghai, in addition to the Edinburgh headquarters. Among its clients are some of Europe and North America's largest pension funds and endowments, and they seem happy. In 2005, 55% of new assets came from existing clients.

The secret of Martin Currie’s success seems to lie in its business structure. Staff have a vested interest in the firm's performance. The company is privately owned and has every intention of staying that way. Last year, there were rumours of a sale but “what was actually going on was the opposite,” says Allan MacLeod, director and head of sales and client services.

Martin Currie has also sensibly stuck with what it knows best – managing equity portfolios for institutional clients. It sold its private client business in 2003 and its private equity business in 2005. The firm is also in the process of outsourcing all its back-office requirements. “We want to keep it simple,” says MacLeod. This principle has also been applied to the products that Martin Currie provides, for example, in the firm’s Japanese funds. The Japan fund, which aims to return the index plus 2%, was five years ago considered to be Martin Currie’s key product. The team running the fund have since added a Japan mid-cap fund, a Japan high alpha fund, two Japan long/short equity hedge funds, and an OEIC. “It’s about leveraging from the same cost base. We’re sticking to active equities and within that there is plenty of room to grow,” says MacLeod.

It is this generation of suites of products around one original fund that the firm wants to create from its UK, US, Asia ex-Japan, China, pan-Europe, and global funds. It is the international equity product range that MacLeod thinks will be the biggest driver of business over the next three years.

In all of its funds, the firm is tough on capacity. “People tend to think of capacity constraints as being limited to hedge funds, but we apply the same capacity rules to our long-only funds,” says MacLeod. Its Japan fund, China fund and UK fund are closed, and MacLeod says that the Asia ex-Japan fund will soon close.

Finally, the success of the business has to be attributed in part to its hedge funds. About 25% of Martin Currie’s revenues come from the higher-margin hedge fund products. The investment manager launched the first hedge fund in 2000, and now with six more under its belt and number eight on the way, it has more than $1 billion in assets in hedge fund strategies. In the middle of April, its most recent hedge fund, a $180 million global resources long/short equity fund, won two big mandates for $250 million, and MacLeod expects a soft closing at the end of June. At that time, the firm plans to launch a global financials long/short equity hedge fund.