James Smith Boutique View
HIM Capital’s principals conducted a manage-ment buyout from insur-ance giant Hiscox in 2007, believing that independence was the best route to establish a fund management business.
MD Mark Stacpoole describes the small but growing company as unashamedly specialist, focusing entirely on the financial sector. Hiscox started up its investment arm in 1998, launching the well respected Insurance Portfolio for HIM chairman Alec Foster, who remains at the helm 11 years on.
In 2002, the group bought two more financial vehicles from Fox-Pitt, Kelton when that company was bought by Swiss Re, with the Asian and European funds considered too specialist for the reinsurer.
Moving forward to 2007, Stacpoole said the group felt that moving away from Hiscox was the best way to build a fund business – although the insurer remains a 40 per cent shareholder and HIM continues to advise on invest-ment issues – as well as attract further staff.
While the name change was minuscule, HIM moved out of the Hiscox headquarters and took functions such as compliance in house, reinforcing its separate nature.
Stacpoole said the key attributes for a niche house are differentiation and perf-ormance, both of which are apparent in the product range.
Foster’s Insurance Portfolio remains the flagship, investing across the non-life spectrum in areas including car, houses and disaster.
He produced solid perfor-mance last year despite the background, which HIM cites as clear evidence that financials are not all the same and the insurance sector does offer non-correlated returns.
Stacpoole also highlights the non-cyclical, non-discret-ionary nature of much of the general insurance market, with cars still needing to be insured despite the recession, for example.
Major players such as AIG have suffered major issues but HIM believes that was down to its financial products side rather than the generally firm insurance market.
Most insurers also have significantly more conser-vative investment approaches than other financials and a lack of equity exposure gave some protection in the carnage of 2008.
Meanwhile, the Far Eastern and European Financial funds are both headed by John Yakas, who moved over from Fox-Pitt, Kelton.
HIM’s latest recruit is Nick Brind, who joined in May following a successful stint running the New Star financial opportunities investment trust.
The group subsequently launched its fourth product for Brind, with his income fund seeking opportunities in recovering financial companies across the globe – owning bonds, equities and convertibles – and aiming for 6 per cent annual distributions.
Both Foster and Yakas are long-time industry specialists as opposed to just fund mana-gers, with the former a 40-year veteran of insurance markets and the latter previously working as a banker, equity and credit analyst.
“For us, investors are out-sourcing one of the more diff-icult areas of investment to us, with insurance notoriously opaque and financials basic-ally dictating overall fortunes in recent years,” added Stacpoole. “With Asia, for example, our niche product allows investors to access the growing domestic markets in the region after years of export dominance. These countries are starting to recycle their surpluses into domestic markets and natural benefic-iaries of this will be financials.”
Far Eastern Financial has enjoyed a stellar 2009 so far, up by around 75 per cent.
In terms of investment process, the group is research-driven with a focus on quality, meaning it tends to outper-form in tougher markets and lag in rising markets – although the strong financials bounce has driven returns in the latest rally.
Stacpoole also highlights the fundamental analysis made possible by the team’s specialist knowledge – with another member, Nick Martin, a former insurance accountant.
HIM remains a small operation with just 10 staff – five of whom are in the invest-ment desk – although it now has £140m under management.
Stacpoole says: “After a tough 2008, we took the decision in April that now was a good time to grow our business and we will recruit more people and launch further products in due course.”
“It is currently a very inter-esting time to be operating in this particular niche – 2008/2009 has largely been about where investors stood with regard to the financial sector and we feel that will remain the case heading into next year.”