Christopher Aldous, chief executive of Evercore Pan Asset talks to Nick Sudbury about how they use ETFs and why asset allocation is the key
Tell me about Evercore Pan Asset and the services you provide.
Evercore Pan Asset manages around £500m for pension funds, charities, family wealth and IFAs. The company was set up in 2007 by John Redwood, Robert Brown and myself, but sadly, Robert died of pancreatic cancer less than a year after we started the business.
Our idea was to cover two aspects of investment needs that we felt were not being well served. The first was the provision of asset allocation advice. This was intended to address the fact that trustees and IFAs have traditionally been left to make important asset allocation decisions without much help from their advisers. The second was to endeavour to bring down investment costs by using index trackers so that investors could hold on to as much of their performance as possible in what looked like being a low return market.
What is your overall investment approach?
We strongly believe that the asset allocation decision is crucial to long term investment performance. There are many academic studies which support this thesis, but just looking at the total return in sterling of various asset classes over the past ten years tells you that this must be true. Developed world equities generally have done little, sterling cash and UK government bonds have been moderate with the more sensational returns coming from developing world equities and gold. Past performance is all very well, but it is also important to apply intelligent, forward-looking analysis to asset decisions and take account of the changing world economic environment.
If you accept the importance of getting the asset allocation right, the idea of losing any of the return from each asset class through underperformance by an active fund manager becomes rather unattractive. The logical extension of this idea is to use the most efficient index-trackers available to capture the maximum possible return from the asset. Two members of our team spend much of their time searching for the best trackers and monitoring the universe of tracking instruments that we use in our portfolios.
What role do ETFs play in this?
The increasing supply and variety of ETFs available in the UK makes our investment approach possible. Before 2007, when we set up Evercore Pan Asset, it was hard to efficiently access the full range of asset classes around the world. Even when we launched there was a fairly limited universe of trackers available compared to what we have today, but over the past three years there has been a massive increase in the range of assets which we can track and the choice of instruments we can use.
Predicted to hit £180bn AUM
Our regular video series continues
Speech to take 20 minutes
£60m AUM to Sanlam UK