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Boutique Manager of the Year: Fixed Income
Capital Four Management
Capital Four, a Danish boutique specialising in high-yield credit and leverage-loans, has grown impressively in the past few years; from 19 staff and €4.6 billion under management in 2014, to €8 billion and 34 staff today. As of May 31, its European high-yield strategy has made 7.2% a year in euro terms, annualised, compared to 5.3% for its bespoke benchmark, which is based on a BAML euro high-yield index. Its Loan and Bond fund has made 6.2% a year, compared to 4.6% for the Credit Suisse Leverage Loan index. Capital Four was founded by portfolio managers Sandro Näf, Henrik Østergaard and Torben Skødeberg in 2001, and in January, the firm sold a 60% stake to Northill Capital, an investment company run by Jon Little and backed by Italy’s Bertorelli family, which is known for a choosy approach to the businesses it backs. In July, wealth manager St James’s Place hired Capital Four to run a segment of its International Corporate Bond fund – displacing Babson Capital.
H2O Asset Management
The London-based fixed-income boutique, founded by former Amundi UK chief executive Bruno Crastes and ex-head of global fixed income Vincent Chailley, has continued the impressive growth path it has been on since launching in 2010. In the past year assets rose from roughly £5 billion to £8.8 billion, helped by new mandates worth £761 million from investors in spite of a difficult market environment. Strong returns have helped. H2O’s global-macro style Multibonds strategy made 10.6% a year, on average and net of fees in euro terms, in the three years to the end of May 2016, while the average fund in the global fixed income funds sector rose by 5.1% and its index (government bonds) rose by 8.1%. The €900 million Multibonds is the top-performing fund in its sector in both three and five years, according to data from FE Analytics. Its other strategies are strong performers too, with the Allegro fund up by 6.7% a year on average, against 0.04% for its benchmark, and the lower-risk Adagio fund up by 1.6% against 0.04%. The firm also reinforced its team in middle office and client servicing functions during the year, and recruited two new portfolio managers, growing overall headcount from 28 to 39.
LCM, which started out in 1999 as a buyer of portfolios of non-performing bank loans on behalf of the Link Financial Group, began doing the same job on behalf of institutional investors in 2010 when it set up a joint-venture with Insight Investment. Assets under management have grown steadily since then to hit €13.5 billion. It launched its first standalone institutional strategy in 2014, the LCM Credit Opportunities Strategy, and has raised €800 million for it so far – it held a first close in July, and says demand has been strong enough that it expects the strategy to top €2 billion by the time of its final close in September. Recent investors include the Teachers’ Retirement System of Illinois, which committed $100 million in May. So far in 2016 it has snapped up portfolios of commercial and auto-leasing loans in the UK from a Dutch bank and a book of consumer-finance in Italy from a Spanish bank, helping both to close unwanted local subsidiaries. Since inception in 1999, LCM’s investment portfolio has made an average Internal Rate of Return of 14.9% a year gross of fees, or 12.3% net, and has beaten the Credit Suisse hedge funds index in 12 out of the 16 years.
Tikehau Investment Management
The asset management arm of France’s Tikehau Group, which invests across credit, private debt and property, has seen another year of steady expansion, with assets rising from €4.2 billion to €5.3 billion and staff numbers expanding from 54 to 70. Its largest fund, the €772 million short-duration eurozone credit fund Tikehau Taux Variables, made 6.9% for institutional investors in the three years to the end of May 2016, compared to 4.8% for the average fund in the FO short/medium term euro bond sector, and making it one of the better performers among its peers. Earlier this year, the firm said it would begin gauging the CO2 emissions of the companies in whose bonds it invests; relatively unusual for a fixed-income manager. The Tikehau Group, founded in 2004 by two young Parisian investment bankers, Antoine Flamarion and Mathieu Chabran (who acts as Tikehau IM’s chief investment officer) scored a coup in July by raising €510 million from new shareholders Temasek, the Singaporean sovereign wealth fund, and FFP, the listed investment vehicle of France’s Peugeot family, for investment in the international expansion of its businesses.
TwentyFour Asset Management
Founded by a team of ex-investment bankers led by Mark Holman in 2008, TwentyFour has since grown to manage £6.7 billion across a range of fixed income styles. Its flagship fund, the £1.4 billion Dynamic Bond fund, has had a challenging 12 months but in spite of this, its longer-term performance record remains intact; the fund is up by an annualised 4.8% in the three years to the end of May 2016, putting it 8th among 75 funds in the IA Sterling Strategic bonds sector. Meanwhile, TwentyFour’s Focus Bond strategy, a global fund, its sixth in its sector over five years with a 5.3% return, and its newer Corporate Bond strategy – launched in January 2015 and managed by Chris Bowie and Gary Shannon, formerly of Ignis – is second in its sector during the one-and-a-half years since launch. In July 2015, the firm also launched an innovative new listed fund, UK Mortgages Ltd, providing exposure to residential mortgages; it raised £250 million in a London Stock Exchange IPO. New majority-owners Vontobel say the TwentyFour business has grown by an annualised 39% since the March 2015 acquisition.