It is difficult to resist the comparison of Bill Nixon’s private equity group Maven Capital Partners with his fondness for driving racing cars across the African desert as both have been seen as risky pursuits only for the brave or foolhardy.
However, while racing cars across the African desert is undoubtedly still risky, Nixon points out that private equity is start to look rather old-fashioned in its return profile – steady growth, consistent income – which is exactly what investors are crying out for in the current low growth, income constrained environment.
Nixon started his career as a bank clerk but has been working in private equity since his late 20s. By 2009, he was head of growth capital at Aberdeen Asset Management but a change in strategy caused him and five other partners to buyout the business from Aberdeen. Maven started with £100m under management and has now grown to £300m, with a target of increasing this to £500m within two years.
Maven CP was spun out of Aberdeen in 2009 and started as a conventional VCT business but with the ambition to grow into a fully fledged alternative and conventional asset management business. Its first initiative was to develop a “co-invested” business, where high-net-worth clients would invest in private equity deals on a deal by deal basis. This made a virtue of necessity. The business launched in 2009, fresh after the Lehmans crisis and the market for capital was tight.
The group then became involved with a number of government-backed schemes, including the Capital for Enterprise scheme, the Scottish Loan Fund and a BPRA (Business Premises Renovation Allowance) deal with Travelodge in Wales. More recently, the group has set up a Jersey business and intends to launch a ground rent fund.
Nixon says: “We see this as a very interesting asset class with good scope for income returns. It is a Jersey-listed vehicle with a target of raising £60m, £40m in debt and £20m in equity. We plan to build a specialist portfolio of residential ground rents, working with a ground rents manager. We should be able to arbitrage them on in due course to a pension fund or other buyer. In a stagnant economy, it is a good place to be. If you can offer 5 per cent income and stability of profits, that is a respectable outcome.”
More recently, the group acquired Fundamental Tracker Investment Management from City of London Group. This is a small business that runs a £3m Oeic as a semi-passive tracker. The fund is currently sub-scale and the group want to “apply some marketing muscle” to get it up to a better size.
Nixon admits that it is a slight diversion: “It is unusual for a private equity manager, it’s a bit of a dabble. But it comes with two people, it’s not a big risk. We’ll give it a try and see if we can build a business.”
The core of the business remains VCTs – the Income and Growth VCTs 1-5 plus the Ortus VCT and Talisman First Venture Capital Trust. The group specialises in the oil and gas sector but this only makes up around 30 per cent of the overall portfolios. Here, the group focuses on the “picks and shovels” rather than taking any development risk. Outside oil and gas, the
VCTs are invested in “almost every conceivable sector, from leisure to food to conventional manufacturing, publishing telecoms”, says Nixon. “We’re very much a generalist investor. Quality of people is key. We believe good people working in harmony can do great things.”
Nixon admits that in the early years, VCTs could be “a tax-efficient way to lose money” but says the industry has changed in character. “The industry has concentrated into a dozen or so managers, the majority of which are generating positive shareholder returns with healthy dividends. People are drawn to VCTs as much an income product as an asset diversification product.”
He says it is important to draw a distinction between different parts of the VCT market. “One might invest in 10 early stage companies, while some of our VCTs are in 40 later stage companies. Six Degrees Group, for example, is a £40m turnover business, making millions of profit each year. If investors have the view that it’s all early risk, high loss-making companies, it couldn’t be further from the truth.”
He says the VCT sector still suffers from the taint of poor performance in the 1990s but he believes everyone should have some private equity in their portfolio.
Has liquidity scared away investors? “VCTs are more liquid than investors think. There is an active secondary market in VCTs. The biggest challenge has been discount management.
Some managers who pay low dividends and don’t do buybacks, those VCTs trade at very wide discounts. Those who do buybacks and pay high dividends trade at lower discounts. The Maven VCTs are in the low single figures. Of course, they are illiquid because investors need to hold for five years to get the tax breaks but, after that, if they pick the right manager, there is decent liquidity.”
The VCT managers stay heavily involved with the companies in which they invest. “After the investment is made, we don’t ask a boy accountant to look after the relationship. We’ve got fairly battle-hardened ex-finance directors of industry in the team who have seen all the tricks. The majority of relationships are positive but occasionally people misbehave.”
In exiting positions, Nixon says it is usually entirely consensual. The management team has reached a stage where they want to exit. In those situations where they take a majority stake, the managers can be much more instrumental in the timing of the sale.
Maven has 40 professionals in house – a blend of a corporate finance-trained corporate accountants, business/economics graduates with experience of buying and selling a private company, plus a team of corporate lawyers and accountants. Around one-third have a professional accounting qualifications but also chartered secretariat.
The group distributes principally through IFAs and wealth managers such as Hargreaves Lansdown, Chelsea and BestInvest. Nixon believes there will inevitably they will be more focus on VCTs and other tax-efficient schemes because of the restrictions on pensions.
He says: “When we set up Maven in 2009, our first VCT offer was only about 60 per cent sold. Our latest scheme was 100 per cent sold in eight days, with 400 new investors. VCTs have grown up, investors trust the product, and they trust certain managers.”
Born: Near Glasgow, 1963
Lives: Gourock, Inverclyde and London
Education: State comprehensive West of Scotland and Strathclyde University
Career: 2009-present: managing partner, Maven Capital Partners; 1999-2008: head of growth capital, Aberdeen Asset Management; 1980-1999: National Australia Bank
Likes: Challenges, Glasgow Rangers, red wine, skiing and desert rallies
Dislikes: Getting up at 4am to fly to London in winter
Drives: Porsche 997 Cabriolet / Rally Raid Desert Warrior
Book: Barbarians at the Gate by Bryan Burroughs and John Helyar
Film: The Bourne series
Album: at the moment – 18 months by Calvin Harris
Career ambition: To get to retirement alive…
Life ambition: To live long and healthy and see my kids all settled
If I wasn’t doing this I would be… skiing