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Robin Geffen

Managing director Robin Geffen set Neptune Investment Management in orbit in the fund firm universe just three years ago and the company is turning in stellar performance, with Geffen himself running a Russian fund which is benefiting from a consumer boom. Interview by James Phillipps.

The planet Neptune is associated with intuition according to astrologists but the fund firm’s managing director and chief investment officer Robin Geffen prefers his decisions to be very much fact-based.

Geffen set up Neptune Investment Management and devised the firm’s investment process in May 2002. Since then, he has seen the number of staff grow by almost fivefold and its assets multiply by more than 17 times.

But moving from six employees to 26 means the company remains small and nimble, he says, and worlds apart from the megalithic life offices where he cut his teeth.

The word boutique is probably the most overused phrase in fund management right now. Geffen says: “People mean a lot of different things by boutique but if what you are trying to get to is an organisation where there is a very close relationship between the ownership of the business and the people who work there, then for me this probably best achieved by having a company where the people who work there own the majority of the business.

“Others define it in terms of the atmosphere or the location even. It is a widely used term and everyone has to define it for themselves. It is not just a size thing – if you run 200m as a boutique, do you stop being one if this grows to 2bn?”

The ownership issue has been a thorny one at Neptune of late with some industry commentators blaming lack of equity incentives as one of the key reasons behind the recent high-profile departures of European equity manager Barry Norris and Greg Bennett.

Geffen stresses that Neptune is 79 per cent owned by employees, including himself, and he has diluted his ownership of the firm from 66 per cent to just under 57 per cent since launch to provide extra equity for the staff. He adds that no external shareholders own more than 4 per cent of the business, which differentiates Neptune from boutiques which are heavily owned by institutional players.

The timing of the announcement of a new bonus structure for staff, coming within a day or so of Bennett’s departure raised a few eyebrows. Geffen says the move is a reflection of where the business is in terms of development.

“We had a three-year plan to get profitable and we hit that eight months early. At this stage, we felt the structure was in place to set up the bonus system.”

Fund managers earn guaranteed bonuses based three quarters on the past year’s performance, with the balance split between three and five-year track records. First and second-quartile performance have a guaranteed bonus with top-decile or top-three performance earning even more. Third quartile gets no bonus and fourth quartile gets a negative bonus credit. Bottom-decile or bottom-three performance can see managers losing salary. A third of the bonus pot is distributed on this basis, with the other two-thirds split between the profitability of the funds and contribution to the team in terms of sector research and analysis.

The global sector research is a cornerstone of the Neptune investment process, which is very much top-down-driven. Extensive individual stock modelling follows from the sector research.

Geffen says the strength of the process is evident by the performance across disparate markets. Six of the group’s eight funds are top-quartile over the past year. Geffen runs the group’s UK equity income, balanced, global equity, concentrated global equity and Russian portfolios. He points out that there is great overlap between them so he is not overstretched.

The Russian fund is the group’s latest addition and will have a one-year track record by the end of 2005. Geffen says he first visited Russia in 1980 and the country today is unrecognisable from the Soviet days. The fund is probably the least well known of Neptune’s range, having been soft-launched although a marketing drive is likely next year. The portfolio benefited from heavy commodity exposure in the first half of this year but has since taken profits and rotated this money into more consumer areas.

“We are emphasising the consumer now. Wages have risen by 20 per cent a year for the last seven years and there is an emerging middle class, which is throwing up opportunities,” he notes.

The fact there are now as many cars as there are people in Moscow shows that the Russians have developed a taste for consumerism. He is an admirer of Russian premier Vladimir Putin and is confident that the succession to Putin in 2008 will be smooth.

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