7IM tries to accomplish three tasks when running client assets – low volatility from broad diversification, containing costs and steady performance. This basically means they manage risk as much as money.
At the core, the group wanted to bring institutional calibre service to the retail market, effectively becoming the outsourced investment division of financial planners.
The overall aim is to support advisers and leave running clients to them, with the ultimate success coming if 7IM is referred to as a business partner.
The founders believe it is not credible for any fund group to claim they are the best in all markets so they do not sell portfolios that are managed in-house. Instead, their approach stresses the importance of asset allocation as a contributor to overall performance.
The group basically creates personal investment profiles for clients and indentifies the best mix of holdings – and fund managers – to meet that.
Another key part of the 7IM ethos is that advisers should not be paid by commission so the business set itself up on a fee basis. At outset, the firm combined expertise from the investment, marketing, technology and client service fields.
CEO Tom Sheridan spent two decades with Prudential Bache and subsequently became MD of Barclays Stockbrokers, where he introduced the UK’s first fund supermarket and second internet stockbroker.
Marketing director Justin Urquhart Stewart trained as a lawyer and also ended up at Barclays Stockbrokers.
7IM has three strands to its business – high-level discretionary management, retail Oeics and a wrap trading platform. At launch, the service was designed for clients with £200,000-plus to invest but the group quickly realised that more traditional retail customers were keen to use it.
As an initial step, they offered the 7IM approach to clients of Zurich Financial Services via its personal investment bond and international wealth account, bringing the minimum investment down to £10,000. Then in December 2003, the group launched its own range of multi-manager funds with five different risk profiles, reducing the investment threshold to a retail-friendly £100 a month.
As cost has become increasingly important in the investment world, 7IM also launched a range of passive funds in April 2008. These have virtually identical asset allocation to the multi-manager funds but implement this via passive instruments such as ETFs rather than active funds to reduce to reduce cost.
7IM’s approach to asset allocation breaks down into a long-term strategic core, making up 70 per cent of portfolios, with tactical plays around the edges. Core holdings – covering equities, bonds, alternatives and cash – are not changed frequently, with the remaining 30 per cent overlay used to take advantage of market opportunities.
7IM works with US firm Ibbotson Associates for asset allocation and manager selection, with the latter’s role to select on the best-performing managers worldwide to populate the portfolios.
On the tactical side, the group has built up an asset allocation committee of experienced advisers with an average of 25 years’ industry experience. This includes former Barings CIO Michael Hughes and ex-head of global analysis at M&G John Hatherley, plus experts in areas such as bonds and FX.
As the third strand of the business, the firm has also been an innovator in the wrap space, launching the first sterling-based account to the UK market. The thinking behind this was to serve as an industry enabler, allowing clients to trade other products using 7IM as a base. To achieve this, the wrap has links to other platforms such as Cofunds and FundsNetwork. As an example of the variety available, there are currently Sipps on offer from over 20 different companies.
From the seven founders, the group has grown to 80 staff and over £2bn under management, with business contin-uing to increase. In terms of ownership, 7IM has two institutional shareholders with minority stakes, Zurich and Aegon, with the rest of the business split across management and staff.