Private client manager brings investment focus

ONE of Edinburgh's oldest custodians of landed wealth has said active investment management is the best defence in today's uncertain markets.

Anderson Strathern, created in 1992 from two law firms dating back more than 200 years, hived off its asset management arm in 2011 and is now signalling its growth intentions.

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As chief investment officer the business has bagged one of the capital's top private client managers, Harry Morgan, who arrived last August as a champion of the virtues of active management. He says: "There is a tremendous pressure to move into passive investments, but that is doing a disservice to the client. We feel we can add value for clients by a bit of market timing and by choosing investments which we think have a chance of beating the index."

Right now the investment team is "pretty cautious", Mr Morgan says.

"My natural instinct is to be optimistic but we feel there is quite a lot to be concerned about." The threat of deflation frightens him. "Don't believe those who say it's a good thing, if we get into a world where wages could be falling in nominal terms, it makes it very difficult for firms to grow their profits." He says politically the US primary campaign is on the horizon and meanwhile the uncertainty around the UK election might prompt investors to sit on their hands for a while.

"We are pretty neutral ... one call we are running with is our US smaller companies position, we think that could do well. A twitch up in the oil price will be very good for the FTSE, we are happy to be in markets and we think a diversified portfolio is going to beat cash."

Although Mr Morgan will use tracker funds, for instance in the US main market, he holds the likes of JPMORGAN US Smaller Companies, Old Mutual's UK Alpha fund and the Woodford equity income fund.

For smaller UK stocks, "we wouldn't look beyond Aberforth, round the corner".

He adds: "A lot of our competitors in the discretionary IFA world throw up their hands and say why bother - we think we are being paid a fee to try and outperform and have a view."

He says even selecting passive funds involves a judgment on asset allocation. "There is a role for passives in a portfolio, but they need to be actively managed. We think investment is at the heart of any financial plan, to some of our competitors it is the last thing not the first."

Alec Stewart, chief executive of Anderson Strathern Asset Management, says the firm manages £255m for around 500 clients, in a "mixture of old and new money, landed and urban money".

He adds: "We act for a number of fund managers, who can't deal with their own affairs and some are running funds which are bigger than ours. We have all manner of clients not just the great and good, people coming out with large golden handshakes, and we do financial work for a lot of other law firms.

"I hate the word holistic but the business has grown to provide a service in financial planning and investment management unlike a stockbroker or IFA."

For Anderson Strathern, Scotland's fifth biggest independent law firm and inside the UK top 100, it meant that ,when handling the biggest personal injury award in Scottish legal history, it was able to provide all the related investment and tax expertise under one roof.

"It is not all landed estates," Mr Stewart says. "For people who have come out of a truly awful scenario we can go from legal affairs to investments in one conversation, without having five or six advisers turning up."

Mr Morgan says the link to a full service law firm offers a growth opportunity for the asset management arm. "People will always need a lawyer, therefore there is this natural scope to refer internally. They won't give you all their business but there is the chance to pitch when there is a family event or a wealth event. To be inside a big firm like this is to have a cross-generational client base, which is really long-term."

He adds: "We will look at what is best for the client rather than trying to sell them something from a menu of assets we can make money on. We have some clients in National Savings, Enterprise Investment Schemes, hedge funds."

Mr Stewart says: "At the moment we have a five-month old (client's) child in a pension and we will take that through to Junior Isas and school fee planning ... we help the money pass from generation to generation."

He adds: "We now explain to clients our positions and what drives the performance of their portfolios. It is good to have big guns behind you, rather than trotting out another fund from Fidelity."