Army captain turned investment general who leads from the front

A former army captain who saw action in the first Gulf War before entering the battle zone of business, Mr Davis made a rapid advance and landed as chief executive of Cofunds in 2011. There he was in the vanguard of the industry’s reluctant moves towards cost transparency, leaving the firm when it was swallowed up by its major shareholder Legal & General.

He says: “I felt the role of an independent platform was to make life easier for investors, give them more opportunity, enable investors to be able to interact with other customers, and provide the best possible opportunity as cheaply as possible.” He adds: “I think other people have different objectives with platforms.”

But the high-flier, having turned his back on potentially “bigger” roles in the industry, says his first job in asset management has fired him up with a new mission. “Having worked in nearly all the sectors of retail financial services, I am absolutely convinced that the greatest opportunities are at both ends of the value chain – the manufacturing end, and in front of the customer....not the bit in the middle.”

That “bit” he says is a life industry where “a lot of the large players are fighting a rearguard action on their legacy book, trying to modernise their product and keep the machine going”. Kames, by contrast, has a relatively new retail customer base, in new products. “I thought the opportunity to build on that was far greater, it is the kind of situation in business I really like, and with 300-odd people you can almost reach from the top to the bottom pretty easily, you have got the ability to affect what people do. “

Mr Davis inherited a business which had been rebranded as Kames only at the end of 2011, yet finished 2012 as the sixth biggest net seller of retail funds ahead of the likes of Jupiter, Axa and Cazenove. That was founded on the former Aegon Asset Management’s long-established success in fixed income, but predecessor Andrew Fleming’s abrupt exit in March 2013 after eight years at the helm signalled a new drive to to meet investor needs.

“We have made some really good progress while not doing anything necessarily radical or different, expanding where we were already strong and trying to build on core capability,” Mr Davis says. “It’s important we focus on that...rather than either chasing the latest fad or building something we think is very clever and trying to convince customers they should take it.”

Kames, always strong in ethical equity, is still seeking to improve its showing in global equities, and last year launched a diversified income fund and its first retail property fund. In February this year it had to close its strongly-performing absolute return bond fund to new money, prompting the launch of two offshoot funds in June, available to both institutional and retail investors.

The business has what Mr Davis calls “probably the best fixed income team in the UK” which has been able to retain and attract talent. “I actually put a lot of that down to our Edinburgh base,” he says. “Our reputation to deliver income, not just fixed income, is relatively unsurpassed therefore what we are trying to do is attract people who are interested in doing this sort of thing. We are not interested in superstar fund managers or people who are chasing the highest returns, but in a team-based philosophy of reducing volatility and certainty of income – I personally believe that is where the need is greatest.”

He adds: “This will only increase as the government steps further back from provision in people’s retirement.”

Rock-bottom yields on sovereign bonds and fears of a bond bubble bursting have prompted talk that fixed income is going out of fashion. But Mr Davis sees an end to the era of “people willing to spin the roulette wheel with their lifetime savings” and a rosy future for income with low volatility.

He says the new government’s direction is clear. “We are probably going to see another four or five years of government stepping back and the private sector stepping forward.”

On whether the business might desert Scotland in the face of another referendum, Mr Davis sees a bigger issue in the European vote. “You could argue that if the UK starts to get slightly wobbly on Europe, we would be better off in Scotland, as a company we would not want to come out of the EU.”

He says the Scottish base has helped drive Kames’ growth. “The London market tends to be a bit frothy, it is very competitive, the Edinburgh market is not nearly as frothy and has been helped by a lot of the consolidation that has gone on.” Edinburgh meanwhile could boast “a really good gene pool of well-educated numerate young people coming through the university system”.

He himself spends around “two to three nights a week” in the Scottish capital, away from London where Kames has several teams including the one servicing Europe, an increasingly important market, where Kames has doubled its sales in the past year.

“The market on the continent is starting to develop in the way our market developed 10 or five years ago,” Mr Davis says. “ Mutual funds are one of the principal beneficiaries and there is a really big shift out of old-style products into more modern flexible investments, particularly in Germany, Spain,Switzerland, increasingly Italy - we have only scratched the surface.”

Continental managers do not tend to have global products, Mr Davis says, and Kames is being helped by the Aegon connections in its parent’s home base of Holland and in other markets.

On the relationship with its Dutch owner, which came into focus when Aegon UK was floundering four years ago and was briefly considered for a sell-off, Mr Davis says: “Anyone doing well is generally given lots of space...the group is more interested in learning what we do and replicating it in other parts of the world. We are working very closely with other parts of the asset management business in Aegon, to help them leverage what we do.”