The latest fund launches of boutique firm Insynergy highlight its model of addressing unmet investor needs, focusing on the world’s leading growth markets of China and India.
The firm launched in 2008, winning plenty of attention through the involvement of Dragons’ Den panellist James Caan as chairman.
Chief executive Spike Hughes boasts more than 20 years of industry experience, most recently helping to set up the Skandia Investment Management business.
Before that, he established the Hargreaves Lansdown fund arm, also working at Winterthur on the sales side and spending 12 years at Scottish Widows.
When Hughes began to consider a venture of his own, he identified various issues with the traditional asset management model of employing highly paid fund managers to run money.
Primary among these was the massive cost involved. He also felt extracting so-called stars from large teams could prove unsuccessful as they can struggle in a new culture.
Instead, Insynergy outsources mandates to existing teams, typically in the institutional space or overseas, which offer expertise in particular areas of the market.
“Our model is all about finding unmet needs in the marketplace and we always wanted to offer better choice rather than more,” he explains.
“China and India are both huge opportunities for the coming years but investors face limited options with many funds run by small teams based in the UK.”
Hughes is also adamant the best chance of outperforming in these regions lies in active stockpicking, with both markets much less efficient than Western markets. On the absolute India fund, Insynergy is partnered with Reliance Capital Asset Management, the country’s oldest and biggest investment firm.
“Reliance is little known in the UK but is a household name in India, with the overall group boasting businesses ranging from telecoms, power and entertainment to financial services,” he says.
“The group counts one in every eight Indians as a customer and has a market cap of over $24bn, boasting massive asset management scale and reach.”
This is clearly evident in performance. In the group’s fourteen-and-a-half years running Indian portfolios, they have produced a return of 3,200 per cent.
On absolute China, Insynergy has linked up with Gam, giving retail access to the group’s market veteran Michael Lai for the first time.
Both vehicles are long short, able to benefit from falling as well as rising companies, but Hughes stresses they are not the sort of market-neutral offering prevalent among UK absolute return mandates.
“Those funds are looking to get 8 to 10 per cent returns from the UK market each year and have to remain fairly defensive to offer the neces-sary downside protection,” he says.
“But both our managers said they want exposure to the growth stories and to get potential returns of 20 to 25 per cent per annum they will run the funds with a long bias.”
Hughes said the macro-economic and demographic case for India and China is well known, with neither country dependent on commodity exports like Bric counterparts Brazil and Russia.
He says: “These countries are surging ahead as the West struggles with debt issues and we would argue that investors can no longer afford to ignore them as economic currents gather pace.
“At present, the average IFA portfolio still has just 2 to 3 per cent in emerging markets against 40 to 50 per cent in UK equities but figures suggest that balance will have to shift if people want to meet their return targets.”
Meanwhile, Insynergy has also recently moved to an open architecture system, listing on various platforms after its initial exclusive distrib-ution deal with Architas came to an end.
Looking at the group’s other funds, the global equity tie-up with Odey founder Crispin Odey is continuing to take in assets, particularly since the group has partnered with more platforms.
However, its debut product, a Shari’ah-compliant fund investing in UK equities, closed at the end of last year.
Hughes concedes they were too early into this market and felt they had to devote the firm’s still-limited resources to the massive growth opportunities available in India and China.
“While the Shari’ah market is growing, it was only relevant to a small number of our potential clients whereas the India and China offerings could be suitable for everyone,” he adds.