Latest News 29/06/2017
How do Cornelian stack up in Edinburgh's competitive Wealth Management space?
Online adviser discussion platform, DISCUS interviewed Cornelian's Marcus Brooks and Hector Kilpatrick to hear how Cornelian stack up against the many discretionary fund managers based in and around Edinburgh. At a guess, how many do you think there are? Ten, fifteen, twenty perhaps...
At last count, Marcus Brooks of Cornelian Asset Managers could name 28 separate managers that offer wealth management services in Edinburgh. Admittedly this was some time ago. However, with such a high concentration of investments managers, we’re sure that makes Edinburgh the most significant financial hub outside of London.
No doubt with so many managers in the one geography competition is fierce. So how does a firm like Cornelian stack up?
While there are several branches of national DFMs based in Edinburgh, Cornelian have carved out a strong reputation as a boutique service provider. The business, founded in 1992 by current CEO Jeremy Richardson, has gone from strength to strength since launch. Indeed, today Cornelian has substantial assets under management amounting to £1.2 billion as of 31 May 2017.
CIO Hector Kilpatrick commented:
“We’ve experienced good steady growth, which is accelerating”.
What has been driving this growth?
Most recently Cornelian has gained traction in the IFA sector with their global multi-asset risk managed fund range. Launched seven years ago, the range has benefited from the increased appetite of financial advisers for investment outsourcing.
Today, Cornelian supports around 450 adviser firms, usually operating on an agency relationship basis. This enables the advisers they work with to continue to own and lead their client relationships, while benefiting from access to Cornelian’s investment offering. And their market leading client reporting, which is more akin to what you would expect for a bespoke DFM mandate, not a range of multi-asset funds.
How do Cornelian manage money and has their investment offering evolved through time?
Cornelian adopt an unconstrained, active approach to investing. Hector Kilpatrick leads the global, multi-asset investment team and is responsible for developing Cornelian’s investment proposition. This is how he explains it:
Our proposition involves managing risk through the cycle and we can de-risk quite substantially should we wish. In our experience this approach resonates with a lot of people, particularly at this stage in the investment cycle.
At the end of last year Cornelian launched a passive version of their risk-managed fund range. These funds use the Cornelian active approach to asset allocation although they use a predominantly passive selection of investments, and are offered at a lower cost. This November these new funds will have a full year performance track record.
How do financial advisers typically use risk managed funds?
Cornelian have found (and we have seen a similar trend at DISCUS) that financial advisers often start their journey towards investment outsourcing using risk managed funds for their smaller clients.
Over time, as they get used to using the Cornelian global, multi-asset, risk managed funds they often begin to see this as a viable solution for their larger clients. Hector sees this as a potential growth driver over the next five or more years - and we agree.
What about models on platforms?
Last year we published an article on the limitations of model portfolios on platforms. John Jackson explained Cornelian’s deliberate strategy of avoiding models on platforms. Why? For several reasons, including the lack of visibility of individual client accounts which prevent DFMs from being able to manage cash or account for capital gains. Add to this the constraints of the available funds or share classes, with individual trading and settlement policies another barrier.
In Hector’s view:
Once the inherent problems with model portfolios become more apparent, both risk managed funds and discretionary fund management should take market share.
Watch this space.
The type of clients Cornelian supports
As you would expect, based on their geography, the core of Cornelian’s business has originated in Scotland. This is beginning to change, as advisers from across the UK become more aware of Cornelian’s investment approach and services.
Today, clients herald from the South coast of England right up to the North coast of Scotland. Many are entrepreneurs or professionals - legal, accountancy, private equity - people who have made their money more recently rather than the older money some of their longer established competitors would see.
As well as private clients, charities make up an important part of Cornelian’s business. Of their total assets under management just over half (£530 million) is in discretionary portfolios. This includes charity portfolios, private clients who have come direct and the clients of financial advisers.
Investing for the future
The team at Cornelian are focused on growing the business, not only from a client perspective, but on the people side too. They are looking to grow by hiring more dedicated investment and portfolio management personnel, as well as client services and business development representatives.
I’m delighted that a trainee I recruited 5 years ago is now heading up fund selection, which is testament to both his qualities and the training he’s had. There is progression in our business, and it’s good that our employees can see this happen.
It certainly sounds like the business is going from strength to strength.
Discretionary Investment Services Coming Under Scrutiny