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Working Insynergy

Any new business needs to differentiate itself from the crowd to win market share in the increasingly crowded and homogeneous investment world. The involvement of Dragons’ Den panellist James Caan certainly helped Insynergy do that on launch last year but the firm also champions a different kind of business model to mark itself out from competitors.

Caan received much of the initial press attention but Insynergy chief executive Spike Hughes also boasts a 20-year-plus industry track record, most recently helping to set up Skandia Investment Management. Before that, he established the Hargreaves Lansdown fund arm and also worked at Winterthur on the sales side and spent 12 years at Scottish Widows.

When Hughes started to consider his own venture, he identified various issues with the traditional asset management model of employing several highly paid fund managers to run money. Primary among these was the massive cost involved. He also felt that extracting so-called stars from big teams can often prove unsuccessful as they 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.

He says this opens up hard-to-access products and managers to retail investors without having to recruit expensive people or disturb existing teams and processes.

Hughes also decided against adding traditional products to an already crowded marketplace which boasts over 100 groups and more than 3,000 funds. His basic approach is to offer better choice rather than more, seeing a huge gap between what investors want and what providers actually sell them.

Within the 3,000 funds on offer, only 20 or so enjoy decent inflows every year and most are from firms with the biggest marketing budgets, according to Hughes. He says: “Few other industries have a manufacturing model that pays so little attention to consumer need.

“Rather than competing with the thousands of funds already available, our strategy is to identify niche areas of need in the market and get a first mover advantage there, finding proven experts in that area to run the money.”

First off the blocks was a Shariah-compliant fund investing in UK equities. Hughes says there are two million Muslims in the UK but the investment vehicles currently available are either not rigorous enough on the Shariah front or not credible in performance.

This mandate is run by former Morley manager Ian Lancaster who is now at Bahrain-based Gulf Finance House. He previously headed the Elite MoneyGuru fund, bought out by Norwich Union, based on a strategy built out of his MBA dissertation.

Also in the range is a global equity portfolio under Odey Asset Management founder and chief investment officer Crispin Odey. Again, this gives retail investors access to his long-only strategy previously reserved for institutional clients. Hughes believes this fund is particularly relevant in current conditions as Odey has a strong focus on capital preservation and avoids herd mentality with low absolute risk.

With future launches, the group will continue with this tack, only manufacturing products in areas of genuine unmet need. In line with its lean business model, Insynergy has outsourced various back-office functions to State Street and IFDS. It has also signed a distribution deal with Architas, the new fund business backed by Axa UK, making the two vehicles available via the Axa Winterthur Wealth Management, Corporate Benefits and Elevate wrap businesses.

Hughes compares this arrangement with buying shelf space in a major supermarket, with Axa among the biggest writers of business in the IFA space. This allows the group to focus on innovation without having to establish a high-cost-base distribution network.

Hughes has looked to several former colleagues to build a small but experienced sales and marketing team, with Matthew Deeprose and Andy Gibb joining from Skandia and David Orr and Gavin Ward from Fidelity.

Deeprose, Gibb and Ward are all business development directors while Orr – also ex-Skandia – will head marketing and product management.

As for Caan, Hughes met him through a mutual acquaintance and says the Dragon was attracted by the focus on meeting consumer needs. He sits on the board as chairman and Hughes says his business acumen has proved invaluable, particularly on the consumer side.

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