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The Wheel deal

RWC Partners originally launched under a different name and with a hedge fund focus in 2000, changing tack with the arrival of Peter Harrison as CEO six years later.

Joining from Deutsche, where he was global CIO, Harrison had previously headed the global equity team at JP Morgan and has subsequently recruited several individuals from that firm to transform RWC.

Dan Mannix came over to head the sales side as well as high-profile fund managers Miles Geldard, Lee Manzi and Ajay Gambhir.

MPC Investors was the original name but the group decided to change this to avoid conflicts with a similarly titled company in the German market, where it does significant business. The firm’s office is a converted stable block in the heart of London, boasting an antique horse winch still in place.

This red wheel provided the inspiration for the new name and the firm became Red Wheel Capital Partners from 2006.

Along with this came a shift in investment focus, with the firm launching a Ucits III Sicav to bridge the gap between hedge funds and more traditional long-only portfolio management.

This FSA-recognised umbrella has hedged sterling, dollar and euro share classes so the firm can sell into different markets from a single structure.

Before Harrison and others joined, the company’s assets were at least 90 per cent in hedge funds but this figure has subsequently dropped to around 40 per cent, with the Ucits III funds coming to dominate.

A key reason behind the relocation to RWC was the traditional boutique factor of providing talented fund managers with an unbureaucratic environment in which to produce optimal performance.

Geldard and Manzi were the first recruits, having run various multi-asset total return portfolios at JP Morgan, including the popular cautious total return as well as a convertible bond offering.

Not surprisingly, RWC quickly launched similar strategies for the pair, including the flagship strategic reserve fund, and they now run $1.6bn (£1.07bn) across several mandates. Geldard is a long-term advocate of convertible bonds although the asset class has only found a genuine audience in the UK very recently.

The group asserts a structural case for this area of the market throughout the cycle as well as the tactical opportunity they have recently come to represent.

Next to join was Ajay Gambhir in 2007, bringing a major retail profile from his strong track record on JPM’s UK and European dynamic portfolios. He opted to launch a European long/short vehicle called Samsara after arriving at RWC rather than long-only, predicting a period of significant difficulty for markets.

Last year, the firm also recruited Sofaer’s Asia and emerging market specialists Carmel Peters and Kirsty McLaren to establish an absolute return mandate in that space, also using shorting where appropriate.

Finally, the last team focuses on UK equities under John Innes and was already in place when the various ex-JPM individuals joined in 2006.

They run a long-biased hedge fund as well as a UK opportunities mandate on behalf of St James’ Place.

In terms of corporate structure, RWC is 85 per cent owned by employees and 15 per cent by various wealthy individuals. There are 33 staff, of which 13 are investment professionals, with the company running around $2bn (£1.34bn) in total.

Like many boutiques, the firm outsources non-core activities but also maintains an eight-strong operations team so it can perform key functions internally rather than wasting time with third parties.

Mannix says its use of external admin helped the firm avoid the reputational damage suffered by other hedge groups recently, as the third party produced independent NAVs. RWC also avoided implementing redemption gates like many counterparts as investors rushed to exit hedge funds.

Mannix believes now is an ideal time for a firm such as RWC to be on the lookout for new talent, particularly as managers going on their own is less possible in the current environment.

He says: “Our assets have been relatively flat in recent times but our cost base never inflated to any great extent so we have not been forced to make cutbacks.

“If you compare that with bigger houses, they have invested huge amounts into their investment function over the last five years, as well as front and back office, but now face asset falls of 30 to 50 per cent, with little change in cost base.”

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