Private clients relate mainly to their wealth manager rather than the brand they operate under, according to Harry Spencer Walsh, investment director at Tyndall Investment Management. That is, providing the wealth manager is confident.
That is why, since moving to start-up Tyndall in 2017, he has already brought in 75 high net worth families – 99% of whom followed him from previous employers Rathbones and Jupiter, says Spencer Walsh.
Since these clients have an average £1.4 million to invest, Spencer Walsh clearly understands what makes high-powered families tick. But he has long moved in high circles, having attended Eton College, where he was a member of the elite Eton Society, alongside Prince William and actor Eddie Redmayne.
Several newspapers ran stories about the society, with pictures of the boys in tails and quirky, individualised waistcoats. Spencer Walsh seems relaxed about the publicity and simply says, ‘yes, the papers certainly had a field day with that story'.
After his first job as a stockbroker, Spencer Walsh moved into wealth management at Jupiter in 2005, switching to Rathbones after it bought Jupiter’s private client business in 2014.
But at Tyndall, he found some kindred spirits who were all excited about working for a small, nimble upstart, having also left larger institutions.
The firm now has £250 million under management – split between £130 million in private clients and £120 million in retail investment funds and segregated mandates.
Following this early success, the nine-person team is recruiting aggressively. Spencer Walsh and his colleagues have been meeting many employees of large firms and their comments about such institutions are not necessarily directed at Jupiter or Rathbones.
‘Many bigger firms acquire others, believing the clients are invested in the brand,’ says Spencer Walsh. ‘They don’t understand the relationship is with the adviser. Many clients found me through word of mouth and social media.
‘Also, larger companies are centralising their investment processes and making people relationship managers focused on new business. Here they can do both relationship and investment management, which I prefer.
'The number of families I manage [is small enough to allow a more bespoke service and plenty of] personal contact. I expect to take on another £50 million in the next year.’
The firm was set up in December 2016 by Alex Odd and Hugo van Kuffeler, both ex-Jupiter, and veterans in the industry may recall that the brand Tyndall is actually an old Jupiter name. Van Kuffeler says technology now enables smaller firms to have the same infrastructure as larger firms.
‘We outsource to people with cutting edge technology – so it’s very cost effective,’ Kuffeler says. ‘We use the Raymond James platform, however, we are not just another Raymond James office. Tyndall is a separately regulated firm using trusted providers, such as Raymond James for systems and BNY Mellon for custody.’
Knowing Brexit was on the horizon, they also chose to take on clients mainly from the UK and leave those domiciled in Europe alone, Spencer Walsh says.
‘We don’t have to adapt [as some firms have] because we’re coming into the market as this regulation comes in,’ he says.
Spencer Walsh describes Tyndall’s investment approach as open architecture. It holds less than 2% of private client portfolios in Tyndall funds, ‘even though they were all top quartile last year'.
Portfolios with less than £500,000 are usually invested in funds only. For amounts over that, Spencer Walsh tends to mix funds with direct equities, providing it matches the client’s risk appetite.
‘It’s all bespoke, so there are no set rules,’ he says. ‘But a typical client with a £1.4 million portfolio would have around 20 direct stocks, representing 30% of the whole portfolio (UK 20%, Europe and the US 5% each), with the rest in funds.
‘I keep around 70% in funds because they’re less risky and more diversified. Then I add alpha by buying the direct stocks that I think will outperform. There are many cheap, attractive stocks available.’
Tyndall uses a range of systems, including Bloomberg and FactSet, to research funds. Criteria include fund manager record, fund size, and performance over various periods, including in falling markets. It looks at any biases and how a fund's philosophy fits the economic cycle.
The team also looks for investment trusts on attractive discounts, of which there are many in Asia at present, says Spencer Walsh.
‘I’ve also done well from being overweight the US, but it does look like US growth is slowing,’ he says. ‘I stuck by Baillie Gifford’s Pacific Horizon investment trust through a tough time, but if there is a trade deal between China and the US, that will do well.
‘We focus on thematic investment, so I like Worldwide Healthcare trust. It has a significant percentage in cutting edge biotech, which should have lots of breakthroughs in the coming years.
‘I’ve been buying the Vietnam Enterprise Investments trust since June. Vietnam is probably the Thailand of 15 years ago – a frontier market with a young population. It will benefit from China-US trade wars because it [has cheaper labour than China] so can manufacture more cheaply.
‘Also I like Stuart Widdowson of Odyssean investment trust. He is an active investor and takes 5% to 15% stakes – almost a private equity approach – in undervalued companies where he can effect changes.’
Spencer Walsh is holding a diversified blend of value and growth style managers.
‘Ben Whitmore, the manager of Jupiter UK Special Situations, has many cheap value stocks in his portfolio that are looking good on high yields, trading on low multiples, so the downside risk is small and the upside risk looks attractive.
'However, there is still a place for growth. Some growth stocks that [fell] in December are starting to look okay.’
Van Kuffeler says that as a young company, Tyndall has made some large capital expenditures but is profitable ‘on an underlying basis’. All the equity in the company is shared among the directors and employees.
‘You can work at a big institution or you can come here for a high percentage of revenue, plus an equity stake,’ he says.
‘Most people [we have spoken to] are relatively underpaid relative to the money they are managing.
'The most extreme case we came across was being paid 8% of the revenue generated, and given what we would pay, they could transfer a relatively small amount of the AUM [and still make more].
‘We’re all here for the long term. We won’t list or sell. If individuals want to exit, we have a structure for that through a secondary market in the firm. We don’t want hundreds of people in an office. We want no more than 20 to 35 people managing £2 billion to £3 billion.'
The downside of being at a smaller firm is low brand awareness, admits Spencer Walsh.
‘I understand I don’t have the pull to invite [renowned fund managers] in for a meeting,’ he says.
Van Kuffeler says another challenge has been investing too much time and energy into recruiting people who did not understand the culture nor have the confidence to move their clients across.
‘The industry looks at AUM, but the most important thing is recruiting quality individuals that fit in,’ he says. ‘We know what the culture is now and have refined our process so that we can assess quickly whether a recruit will fit.
'The hardest bit was the first £50 million. Now we have amassed £250 million in 18 months and have a large pool to go fishing in. The people we are talking to run well over a billion.’
They can also offer a more relaxed environment, the pair say. Spencer Walsh does not need tails and waistcoats any more – these days, he wears polo shirts to the office.
‘The atmosphere here is so refreshing,’ he says. ‘Elsewhere, people feel pressure to get in early, and working from home is frowned on.
'Here, there is none of that pressure. The work-life balance has changed for me. Happy clients are crucial, but if your wife and children are happy, that also helps.’