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Another Mercury Asset Management spin-off shows that lack of size is no impediment to great investment performance and profitability
21/04/2017 , Ian Orton

Mercury Asset Management, which started life as the investment management arm of S.G Warburg before subsequently being acquired by Merrill Lynch in 1997 has spawned a number of boutique firms.

Some of these, such as Thurleigh Investment Management (now a component part of Tilney) and Dalton Strategic Partnership, have offered private client investment management services. Others, while focusing primarily on the retail and/or institutional markets, have also provided outsourced or third party investment management services to UK wealth management firms.

London-based Majedie Asset Management (MAM) is one of the latter. Launched in 2002 by James de Uphaugh, Chris Field, Rob Harris and Adam Parker, four members of Mercury Asset Management’s Alpha Team, MAM currently manages money for St James Place. But it also managed money for Coutts during the time it operated a “manager of managers” investment strategy.

MAM has provided further evidence of the ability of new investment management start-ups to grow and prosper notwithstanding the admonitions of investment consultants and the rise of passive investment management.

With around £14 billion of assets under management in a family of long only and “alternative” funds the firm generated £115.52 million of revenue in the year to 30 September 2015 and posted pre-tax profits of £47.74 million.

Indeed MAM argues that the pursuit of scale can be an impediment to good investment performance.

“We view our capacity as scarce; we believe investment performance suffers from diseconomies of scale if assets under management grows too large,” it says. “We are determined to maintain the size advantage for our clients and therefore limit the available capacity in each of our own funds.”

MAM, along with its family of investment funds, has tended to have a UK focus.

More recently, however, it has expanded its geographic reach by launching investment funds that focus on global and US equities. In 2007 it also launched The Tortoise Fund, a global equity long/short fund that aims to generate absolute returns.

Nonetheless, it is MAM’s expertise in UK equities, as exemplified by its flagship UK equity fund that has underpinned its reputation. With around £3.8 billion of assets and managed by Chris Field the MAM UK Equity Fund has outperformed the FTSE All-Share Index in eight of the past ten years.

Over the past five years it has generated a return of 79.5 percent. The FTSE All Share has produced a return of 60.4 percent over the same period. Since its inception it has posted annualised returns of 12.9 percent net of fees.  

The Tortoise Fund is also a relatively large fund with around £1.0 billion of assets under management and has generated an annualised return of 9.6 percent net of fees since inception.

According to its most recent annual report and accounts for the year to 30 September 2016  the UK Equity Fund (30 percent) and the Tortoise Fund (15.9 percent) along with shares in MAM itself (28 percent) account for the bulk of Majedie Investments plc, a London-listed investment trust with around £140 million of assets, managed by MAM. 

This has also performed well over the past five years. Its share price had appreciated by 121.4 percent over the five years to 20/04/2017 and its net asset value by 82.4 percent.
 

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