Cazenove Capital Management is quickly establishing its reputation in the fund management industry with a high profile team and focused fund range
Cazenove is one of the most familiar names in finance but until three years ago, its stellar reputation had been built though investment banking rather than fund management. When chief executive Andrew Ross arrived in 2002 from HSBC, he set out to transform Cazenove's fund management business.
Ross brought in the high-profile Tim Russell as head of pan-European equities, who, in turn, brought a team of four. Almost three years on, Cazenove Capital Management now has £8bn of assets under management, has recruited star manager Neil Pegrum and has attracted the backing of many advisers.
The group had previously managed assets on a worldwide basis and did not have a high profile among the UK adviser community. Ross's view was that no one house could be the best at everything and, as such, the group should aim to become a specialist house. As it stands, the business specialises in pan-European equities, fixed income and multi-manager (launched in conjunction with M&G).
Tim Russell's UK Growth and Income fund at HSBC had been one of the most successful core funds of the past decade. Across Russell's six funds at HSBC, he managed over £2bn in assets. Russell came to Cazenove with the majority of his team intact. He brought Chris Rice, Steve Cordell, Julie Dean and Wade Pollard. The team was given a boost with the arrival of Neil Pegrum from Insight in August 2004. A star at M&G for many years, Pegrum left Insight after just a year. During that time, however, he had made his Insight UK Dynamic fund the top fund in the UK All Companies sector.
The team takes a pragmatic approach to investing, which it labels 'business cycle investing'. Richard Pursglove, sales director at Cazenove Capital, says: "Our investment approach aims to identify different stages of the economic cycle and the impact that has on corporate earnings. We want to understand what drives earnings throughout the cycle. We analyse where we are in the cycle and skew the portfolio to the relevant stocks. It is pragmatic; we are not permanently wedded to a particular style and invest across the market. There are no stocks that we would never own."
For example, and in simple terms, as GDP slows, interest rates fall to stimulate demand. As this demand materialises in a pick-up of growth, such as happened in March 2003, cyclical stocks tend to do better than their defensive counterparts, which are more resilient when GDP slows. Pursglove describes it as an 'all-weather' style, which is why Russell's team is so often used for core funds. Risk is relatively low and the funds produce a consistent return. Of course, the European market has different idiosyncrasies to the UK market and each fund manager is given leeway to make their own stock selections.
Latest arrival Pegrum also has a pragmatic approach, borne out by his track record, but his new Cazenove UK Dynamic fund is riskier than its stable mates. Pursglove says that the group does not aim to fill the team with people who think in the same way, believing that differing views encourage healthy debate.
Pegrum is a bottom-up investor. He looks to achieve absolute returns by doing fundamental analysis on stocks. He is looking for hidden opportunities and will only hold around 40 stocks within the portfolio in contrast to the 80-90 stocks within Russell's portfolio. He invests across the market capitalisation spectrum and does not have any constraints in terms of benchmark. The fund has already attracted an AA rating from Forsyth OBSR.
Cazenove Capital also has a multi-manager range used by its own private clients, with its retail proposition launched in January 2003 in partnership with M&G. The funds are managed by a team led by Mark Harries. M&G is the sole distributor.
Pursglove says that the group continues to broaden its distribution. Initially it targeted interest from the discretionary end of the market, but is increasingly seeing fund flows from the broader advisory market. The group has developed its third-party links with life offices and is generating business through those channels. Despite the absence of a three-year track record for the group's major funds, it has raised £1.5bn in assets.
Cazenove is launching a UK Equity Income fund on the 9 May. It will be run jointly by Wade Pollard and Matt Hudson. This fits in with the group's strategy of having products covering a spectrum of risk. For example, the Growth & Income fund aims for 1.5% outperformance of the All-Share, the UK Opportunities fund aims for 3% outperformance while the UK Dynamic fund aims for 5% outperformance.
The asset management arm of Cazenove Group only recently adopted the moniker Cazenove Capital Management in order to forge an identity separate from its parent and to differentiate itself from the investment banking business, JPMorgan Cazenove. Whilst previously it may have been regarded as a house only for the high brow, Cazenove Capital has become accessible to the many rather than the few.
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