Liontrust chief executive John Ions has overseen the group’s expansion from a £1bn boutique to a sizeable player in the asset management space, currently standing at just over £12bn AUM.
He tells Kurtosys how his company’s culture is maintained amid organic growth and multiple acquisitions, and the role millennials will have to play in the future of investments.
Liontrust has grown strongly under your stewardship, now with £12bn in assets under management (AUM), yet seemingly, the firm has maintained its boutique culture. How do you manage that?
We have increased our AUM from £1bn in 2010 to £12bn at the end of September 2018, and we believe this is down to the quality of our fund management teams, having robust investment processes, creating a distinct and high-profile brand, building strong distribution and providing a first-class service.
As we have grown and expanded over the past few years, we have kept our focus on our areas of expertise. There are lots of things around us that we could get involved in, but we just want to make sure the things we do, we do well.
The culture of the business is important in enabling us to achieve and deliver these objectives. For example, we strive to create an environment at Liontrust that is attractive to fund managers, which helps talented teams to perform for our investors. Fund managers can focus on running money and not get distracted by other day-to-day aspects of running an asset management business, particularly administration.
At the heart of the Liontrust culture is the fact that our fund managers are truly active, they are investors rather than allocators of capital.
One of the advantages of being a smaller asset manager is that fund managers can have the courage of their convictions and seek to add value to clients through their skill and the investment decisions they make.
You deliberately don’t have a chief investment officer, or offer house views. Can you explain that strategy?
We believe this is another attraction for fund managers. Our managers have the freedom to run their portfolios according to their own investment processes and market views.
Each of our eight teams has a distinct and rigorous investment process that is applied to the management of their portfolios. This ensures the way they manage money is predictable and repeatable and the expectations of investors are met. Having documented investment processes also helps to create in-built risk controls for our fund managers, especially in more challenging environments, by preventing them from investing in companies for the wrong reasons.
This approach has allowed us to attract and retain talented teams, such as those most recently – the sustainable investment team we acquired from Alliance Trust Investments, headed by Peter Michaelis, and the global fixed income team we recruited from Kames and Baillie Gifford, headed by David Roberts.
To that point, Liontrust has been particularly acquisitive since you took over. Are there any gaps in the armour, or strategies you might like to still consider?
When we recruit teams, we are looking for fund managers who have skill, robust investment processes, can add value to investors and manage money in an asset class or with an approach that will appeal to clients.
We don’t start from the point of looking at which asset classes we don’t have funds for.
Our current teams all have strong track records, proven investment processes, strategies that appeal to investors and the capacity to grow assets so we don’t need to recruit any other teams at the moment.
What do you see as the biggest challenge facing the asset management industry over the next 12-24 months?
I believe asset managers’ key objectives should be to deliver what investors want and expect, to add value and to encourage more people to plan and save for their futures. Achieving the first two will help develop more of a savings and investment culture in the UK.
For too long, our industry has delivered what we want to offer investors rather than delivering what they want.
It is also key that if managers say they will run a fund in a certain way then they do so, therefore meeting client expectations.
Financial education and providing simple, engaging and aspirational messages and information will also encourage people to save and invest over the long term.
How do you plan to tackle it?
There are several things. First, we focus on those areas of investment where we feel we have expertise. The documented investment processes of each of our fund management teams mean they run money in the way that investors expect them to. We also provide regular, clear and relevant communications, both to our existing investors and potential ones.
We are also supporting financial education projects that are currently focused on primary school children. YouGov research into financial literacy reveals that just 8% of those aged 18-24 in the UK are confident in handling money. The UK Government’s Financial Capability Strategy recognises the vital window of opportunity that exists between the ages of three and 18 to transform the UK’s future financial health.
What’s the biggest opportunity you intend to harness?
One of the biggest opportunities for us will be the growing demand for ESG and sustainable investment as investors increasingly focus on how their money is managed as well as the returns they can make.
Our sustainable investment team’s AUM has increased from £2.5bn to £3.4bn since they joined Liontrust on 1 April 2017, and we believe demand for this approach will continue to grow, particularly as more millennials start to invest.
There is evidence now that sustainable investment can provide strong returns over the long term while also meeting investors’ values. You don’t have to sacrifice one for the other.