Kames Capital has racked up a fivefold increase in profitability since rebranding from Aegon Asset Management four years ago, the manager has revealed.
Profits are up from £3.25million in 2011 to £15.8m last year, while assets have moved up from £49billion to £56bn, a rise of 14 per cent.
A shiny makeover of former Aegon UK space at Edinburgh Park has given Kames a classy headquarters reception area, with Bloomberg radio on tap, reflecting the upward mobility of the investment divisions of big insurers such as Dutch giant Aegon and the capital’s Standard Life.
Stephen Jones, 12 years with the Edinburgh house and chief investment officer since March 2013, says he is leading a team on the up.
“We are not owned by Aegon UK but by Aegon, part of the broader asset management activity of the group,”he sayd. “The offer is broader and the external growth has been characteristic of Kames’ activity over the past five years. It takes a long time to build a deep brand and we certainly think it has got resonance with the distribution channels. It is all about performance and staking out the ground we want to be known in.”
The industry has for some time been moving towards ‘multi-asset’ strategies to offer investors new and attractive income-oriented products in a low-return world.
Kames, which has 250 people in Edinburgh, has built on its traditional strength in fixed income by launching a successful suite of absolute return funds, and a diversified income fund drawing on group-wide expertise. That has helped reinvigorate its historically weaker equity business and its property team which forms part of its 50-strong London office. At the same time Kames has maintained a long-standing reputation as an ethical equity specialist.
“The business has expanded as assets and clients have come towards us and we have also expanded into Europe, and are across 14 jurisdictions now, so we have been recruiting to fill that,” Mr Jones says. “We have been able to take some of our growth and reinvest it in the business.”
He says Kames’ equity teams have helped drive the success of the absolute return funds, which aim to be ‘market neutral’ and deliver cash plus four per cent. “They have grown from nothing five years ago to £500m to £600m in size and a cabinet-full of awards and, that is a counter to the argument that equity has been difficult for us.” As well as a continuing following for its UK-biased ‘dark green’ (heavily-screened) ethical funds, the equity team has a strong-performing UK fund run by Stephen Adams, now head of equities, and a smaller companies fund run by Elaine Morgan which is in the top 10per cent of the sector over a year and the top 25 per cent over two, three and four years. A global equity income fund run by Pauline McPherson meanwhile recently picked up an industry award.
“I would say our equity activity both domestically and internationally is in better shape than the historic pattern might suggest,” Mr Jones says.
He adds that investment performance is more scrutinised than ever. “The dynamics of the industry are such that the alternative – passive investment – is very available, very cheaply. So you have to define yourselves as being meaningful, consistent, appropriate to your customer base, and competitive...going forward that is what we are trying to do.”
On the contribution made by former chief executive Andrew Fleming, who left abruptly in 2013 after eight years to be succeeded by former Cofunds chief Martin Davis, Mr Jones says only that the building of the brand and the expertise in Edinburgh has been a team effort and that “the investment teams have been here for a long time”.
A Yorkshireman who worked for NatWest’s investment bank, married a Scot and came to Edinburgh after from a brief sell at Britannic in Glasgow, Mr Jones says Edinburgh as a headquarters is “absolutely not a disadvantage” when it comes to recruitment. “We do believe in a team approach, teams are functioning well here. It’s exciting to be part of something that is growing and making progress.”
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