Have you formed any new partnerships as part of your distribution strategy?
We’ve got a number of partnerships that we’re not shouting about yet. We will try it out first to see how it works.
This isn’t about owning distribution in the sense of saying, “We expect you to give X% of your business to us”. I understand it’s worked that way in the past but that’s a relationship you would never have in the UK.
A partner can be profitable without necessarily giving you all of its business. An example of that was small company Parmenion, which Marlborough took a substantial stake in. This was very successful for the business.
Or it could be that we say, “We’re not going to give you any money at all to begin with but with us helping you to become more successful, it may eventually mean we do want to take a stake”.
A company we are very close to in South Africa is Carrick Wealth. In the Emirates we are identifying companies we think could potentially be more successful, particularly those that want greater presence in the UK. These are businesses that are not afraid to expand, that want to be global and would be prepared to operate in any jurisdiction where they are able to.
For example, separate from my capacity as a non-exec at Marlborough, I sit on the investment committee for Alexander Beard Group. I believe that business is a model for a company that could trade in a variety of different jurisdictions.
I sit on Distribution Technology’s investment committee and on the advisory board as well. Through that, I see a lot of businesses, warts and all. It helps to build a framework of the types of businesses you want to be associated with.
Geographically, where else is Marlborough focusing?
The world is our oyster. I’m conscious of the fact there’s a regulatory wave running from west to east and pushing people along with it. The question is, when the tide has gone out what will be left?
There are jurisdictions that are, shall we say, more comfortable to work in because you can see the direction of travel.
South Africa is a good example of that. Africa is the real frontier in terms of the rise in middle-class wealth, sub-Saharan Africa particularly. That’s a place where you would want to build a relationship now, rather than hanging on until it is developed.
The Emirates is clearly where a lot of money is now but it is still relatively unclear how firm the move towards a more UK-style regulated environment is.
The one key thing, and I’m sure Marlborough isn’t the only business to experience this, is the solution versus the single-strategy approach. It is quite clear which direction the world is heading in. In the UK, people are unafraid to outsource investment because they are comfortable with the idea that financial planning has value.
Could Marlborough’s fund range potentially tap into the retirement market?
Clearly there’s an affinity there. The fact is that most people who have sizeable pension pots, when questioned, say they want the money to pass on to their children and grandchildren. Good advisers who have an interest in business longevity can, in effect, run a small family office for each generation.
It’s now about inheritance roll-down and whether there will be a capital pot at the end for the next generation, who, incidentally, will not be as wealthy as this generation.
We are looking at a timeframe of 100 years or more. Taking myself as an example, I’m 65 next year and have a 10-year-old son. I also have two kids from my first marriage, both in their 30s. I’ve also got a grandson who’s older than my son. Family structures have changed a great deal. By the time my 10 year-old has grandchildren, it could be past the year 2100. So there’s the prospect of years and years of investment.
In that case, it’s not about wanting to switch from one fund to another but, for example, investing in equities that focus on less information-rich parts of the market for part of a portfolio. Businesses such as Marlborough should benefit from that.
Can you spotlight any business initiatives coming in the year ahead and beyond?
If we identify businesses that we believe we would want to take a stake in then that will be on the cards, and we won’t be limited to any particular jurisdiction.
Whether this is an advisory, wealth management or another asset management business, so long as there is a revenue-enhancing stream that we currently don’t have, we would be interested.
As an example, one of the businesses in the Marlborough group is IFSL, which is an authorised corporate director fund-hosting business. If we’re going to have a partnership with advisers who want to manage their own money, we already have that in-house business connection to help them do that.
The business has no interest in just plugging holes in the fund range with, say, an absolute return fund. However, it may find a fund manager who just happens to be wonderful at premium large-cap or whatever it is. So, that is never off the table.
The key for Marlborough, in terms of its success internationally, is that it needs to be a £1bn business. It’s still very small. We’d anticipate being somewhere over £300m by the end of this year and the three-year plan is £1bn. That’s not lofty.
There are stages you go through in order to do that. It’s about having the right people on the ground to help you make those connections and, when you make a promise to support a business, seeing that through.
