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10th February 2008
64,209 Posts
Discussion Starter · #1 ·
Three articles from this weeks addition of Crains to start this thread off.

Exodus of fund managers goes into reverse
Region's rich no longer need to look north or south for a private banker
By William Hall

London or Edinburgh? Until recently it was assumed that Manchester's wealthy families and self-made entrepreneurs had little choice but to head down to London or up to Scotland for the best advice on how to manage their fortunes.

The recent influx of private banks, such as Kleinwort Benson and Credit Suisse, indicates this is starting to change. But the new entrants are no more than marketing outposts set up to service the North West's growing band of millionaires. The real investment decisions will still be taken by fund managers based in London, Edinburgh, Geneva, or New York.

The vast bulk of the £3.5 trillion managed by members of the UK's Investment Management Association is run out of London with Edinburgh coming a distant second. Manchester probably manages around £15bn, or less than 0.5 per cent of total UK funds under management.

Twenty years ago, pension funds of local companies, such as Turner & Newall and Amec, plus the local authority pension funds, would have had sizeable in-house investment teams based in Manchester.

Today, these investment management skills have been outsourced to fund managers in London and abroad. In the case of the £10bn Greater Manchester Pension Fund, which has well over 200,000 members, its investments are managed by Switzerland's UBS Global Asset Management, Capital International, a US manager, and Legal and General, a UK firm.

The big exception is Co-operative Financial Services (CFS) which manages close to 80 per cent of its £18.4bn portfolio out of Manchester. It has been managing funds for its insurance and retail banking clients for over 20 years, and, unlike its slicker rivals, never bought into the idea that London was a better place to manage money than Manchester.

Today, CFS's fund management arm is one of the jewels in the crown of parent the Co-operative Group. CFS has made a name for itself pioneering socially responsible investment (SRI). Last year its flagship £180m Sustainable Leaders Trust not only topped the ethical fund charts but also a list of 320 funds general funds which did not have the same investment constraints.

CFS's Mike Fox, manager of the Sustainable Leaders Trust, was named UK growth fund manager of the year in 2007 by the Citywire research house.

Ten years ago one could have argued that Manchester fund managers were at a disadvantage because companies concentrated on London to sell themselves to in-vestors, said Fox. But no longer.

The combination of better information flows and video conferencing means that Fox only needs to spend two days a month in London.

Indeed, he believes that being based 200 miles away helps him to maintain a sensible long-term focus well away from the rumours and short-termism of the City.

The CFS's growing success in the fund management business is not the only sign that the steady exodus of fund management talent from Manchester over the last two decades has been reversed.

New chief

Brown Shipley, the UK private banking business which is now part of Belgium-based KBC Group, runs its growing Solus retail fund management business out of Manchester with half a dozen funds totalling around £300m.

In April it bought Altrincham's Bollin Asset Management (BAM). Apart from adding close to £50m of funds under management it appointed Peter Botham, BAM's founder, as Solus's chief investment officer.

Botham, like Solus managing director Ian Sackfield, is one of several fund managers who learned their trade at Henry Cooke Lumsden, a private client broker which once dominated Manchester's financial community but was gobbled up by Brown Shipley in 1999.

Botham says that Henry Cooke would make a good case history of how to “rest on your laurels and destroy a firm through inertia”.

Other Henry Cooke alumni to resurface on the local fund management scene are John Eckersley and David Soutar, who established Castlefield Investment Partners in 2002. It manages four funds which are marketed through Premier Asset Management, a £2bn investment management boutique based in Guildford.

Altrincham's Mercater Capital Management, set up in 2003 by David Oakes and Alaric Gordon, also has strong Henry Cooke ties.

Oakes is a former managing director of Arkwright Management, Henry Cooke's unit trust subsidiary, and Gordon a former Henry Cooke fund manager.

Ex-Henry Cooke fund managers are not the only show in town. Martin Alister, who runs WH Ireland's £86m UK Growth Trust and is about to launch a new income fund, spent most of his career in London.

The same goes for Mark Sheppard, a former ABN Amro small companies analyst, who now runs the £60m Manchester and London Investment Trust, one of the UK's best performing investment trusts and flagship fund of Manchester's £260m Midas Investment Management.

The fact that it is the “Manchester and London Investment Trust” and not the “London and Manchester Investment Trust” is a reminder that Manchester's fund management industry is far from dead.


Does Manchester need a regional stock exchange?
By William Hall

Does Manchester need its own regional stock exchange to help finance small companies that have traditionally found difficulty raising between £500,000 and £2m of new equity?

The global credit crunch, manifested by tightening bank lending criteria and the drying up of private equity capital, has raised yet again the question of whether Greater Manchester's small business community might benefit from the reintroduction of a regional stock exchange catering for small firms ignored by London-based financiers. David Read, head of business finance at the Northwest Regional Development Agency (NWDA) said there was “strong evidence” of an equity gap across all regions of the UK for sums of between £250,000 and £2m. He is watching with interest the progress of Birmingham's Investbx, the first virtual regional stock exchange, which opened for business last July.

By providing an online regional trading platform with a local presence, Investbx promises small companies a simple and low cost way of raising capital, and offers investors an exit route via a monthly online auction system which matches buyers and sellers at a single price. So far only one company, Teamworks Karting, which runs race venues for go-karts, has tested the water. It only raised £500,000 — less than half of what it planned.

However, Investbx chief executive Susan Summers is confident that a couple more companies will be listed this year and another 10-15 companies in the next few years.

Investbx, which received £3m of backing from Advantage West Midlands, the regional development agency, has secured “tremendous support” from Birmingham's professional community, said Summers.

Manchester's professional community, by contrast, remains sceptical about this Brummie initiative. A Pro.Manchester working party looked at the idea some years ago but nothing came of it, because of regulatory concerns and lack of finance for a pilot project.

Laurie Beevers, WH Ireland's chief executive, describes the idea as an “absolute waste of time” when small companies can just as easily get their shares listed and traded on the rival AIM and Plus stock markets.

Andrew Wright, a corporate partner at the Manchester office of law firm Cobbetts, didn't believe there was much call for a regional stock exchange — virtual or otherwise.

“This is a personal view, because my colleagues in Birmingham have been involved in the technical aspects of setting up InvestBx and are strong supporters of it, but I just don't believe there would be enough liquidity in a regional stockmarket,” he said.

“In a perfect world it would be a great idea — I'm a great believer in Manchester and I'm a northern boy — but I just don't think there'd be enough buyers and sellers.” He cited the example of the Newcastle and Bendigo stock exchanges, which were two local exchanges created in Australia in a bid to attract investors to local firms.

“They've been at it a few years before us, and I don't think that's worked very well.”

Wright agreed with Beevers that regional exchanges would need high quality local businesses in order to thrive, and that most of these had a variety of other funding options open to them, including AIM.

He added: “People are always saying there is no liquidity on AIM, but there is if you're making a profit.”

The Financial Times, however, is less harsh on the Birmingham experiment, concluding that “if it succeeds, Investbx will be hailed as a visionary experiment other cities should copy. If it fails it will be decried as a manifestation of public sector folie de grandeur”.


Private banks put the emphasis on wealth preservation as clients fear volatile markets
Hiring frenzy shows no sign of ending despite the credit crisis
By William Hall

Want to know how to make a small fortune? Answer: Give a private bank a big fortune to manage. There is more than a grain of truth in this hoary old banking joke. Charging one per cent a year to manage a private client's portfolio might not sound excessive in a period of double-digit annual returns.

But when the stock market is down close to 10 per cent over the last year, and below where it was eight years ago, a one per cent annual management fee starts to look like an unnecessary cost.

Nevertheless, heightened investor nervousness triggered by increased stock market volatility, the threatened recession and global credit crunch, have not led to any obvious downturn in demand for the services of the growing number of private banks now operating in Manchester. Indeed, quite the reverse.

The Manchester branch of Coutts, the Royal Bank of Scotland Group's private banking arm, has increased its Manchester staff by 50 per cent over the last year, adding five new private bankers.

“There is no doubt the credit crunch has affected clients' thinking and the security of financial institutions has been a hot topic of conversation”, said Dylan Williams, a senior private banker in Coutts' Manchester office.

There has been an increased focus on “wealth preservation” products for clients that have recently come into cash, while other clients have reduced the risk in their overall strategy by taking profits on investments made over the last three to five years.

Lisa Govier, area manager for Lloyds TSB Private Banking in Manchester, said new client numbers have trebled in Manchester over the last year and Lloyds TSB, which offers a “Mayfair” banking service for its seriously wealthy customers, is recruiting additional private bankers. Govier notes an increase in demand for products which offer capital protection. “Clients are still happy to dip their toes into the stock market but want to make sure they don't lose their capital,” she said.

There has been a “huge demand” for Lloyds TSB's recently launched “market-linked deposit”, primarily because it promised capital protection. Lloyds TSB is one of very few High Street banks still to have its bank deposits rated Triple A by Moody's.

Safe option

Cash structures are the safest option for the highly risk-averse client, said David Jones, head of HSBC Private Bank in Manchester.

He sees the current downturn in the market as “nothing more than a temporary dip” and reports that HSBC is adding to its private banking staff in Manchester by recruiting a relationship manager specialising in advising wealthy South Asian individuals.

Whilst Manchester's private bankers report rising demand for their services there has been a shift in marketing emphasis away from lending and towards deposit taking.

The shift partly reflects the changing investment appetite of customers with demands for shorter term, and more liquid, financial investments growing at the expense of bank loans to buy illiquid property.

But it also reflects an overdue awareness by many banks of the need to bolster their own domestic deposit base and reduce their reliance on funding from the wholesale money markets.

The collapse of Northern Rock demonstrated what happens when a bank becomes over-reliant on the money markets for its funds.

10th February 2008
64,209 Posts
Discussion Starter · #2 ·

London lender pulls out of launch
By Michael Fahy

London-based property lender Pure Bridging has pulled the launch of its Manchester office.

It had planned to open a new operation in the city this summer to serve the north of England but has now decided to indefinitely postpone the move, citing worsening conditions in the property finance market as a key factor.

David Mullins joined the firm in March as its northern business development manager from Manchester-based Blemain Group (part of Henry Moser's Jerrold Holdings empire).

He said although a Manchester office launch “had not been ruled out” at some stage in the future, no date had been set and he would be serving the northern market from his home address. Mullins said the firm had changed its investment priorities, particularly in the light of competitors laying off staff.

“There are a lot of good people becoming available,” he said. “Everyone is taking stock. It's the nature of the business — to make sure that what you do doesn't have any negative impact on the business going forward. Finding the right people in terms of underwriters who can go out on their own and operate self-sufficiently is important to us. We pride ourselves on service and on being able to give same-day decisions wherever possible.”


Pure Bridging, whose parent company is registered in the Isle of Man, offers between £30,000 and £3m on loan-to-value (LTV) ratios of up to 80 per cent. It made a pre-tax loss of more than £350,000 in its maiden 10-month period to the end of 2006.

Eugene Esterkine, a director of Manchester-based bridging financier Affirmative Finance, expressed surprise at the London-based firm's decision to pull back from its northern launch. Although he said that the local market remained fragmented, with a rush of new entrants developing loan books in a soft market of up to £20m in recent years, tightening credit conditions and overextended lenders meant there were opportunities for bridging financiers with established lines of credit.

“There are enormous amounts of business to be done,” he said.
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