Fri, 30/04/2010 - 06:00
Spike Hughes, chief executive of Insynergy Investment Management, says that building on the existing success of its initial retail fund run by Crispin Odey and new absolute return funds targeting India and China, the firm will seek out further world-class investment teams with proven strategies that can be adapted to a Ucits structure.
GFM: What is the background to your company and funds?
SH: Insynergy Investment Management identifies unmet investor needs and searches the globe to find world-class ‘off-market’ managers – those previously not available to the retail market. We then launch an Insynergy fund providing exclusive access to the managers we have found. Our initial fund launch was with Crispin Odey, who is definitely world class by any standard. This fund has now gathered around GBP80m and assets continue to rise.
The new managers that Insynergy has signed exclusive deals with are Reliance Capital and GAM, both again in the category of world-class investment houses. Reliance will manage Insynergy Absolute India, a long/short Indian fund, while GAM will manage Insynergy Absolute China, a long/short China fund.
GFM: What is the structure of your funds?
SH: The Insynergy Odey fund is a UK non-Ucits retail scheme authorised and regulated by the Financial Services Authority. The new China and India funds are sub-funds of Insynergy Funds, an Irish investment company with variable capital (open-ended investment companies). The funds, which are authorised and regulated by the Irish Financial Services Regulatory Authority, are Ucits schemes that make use of Ucits III regulations allowing for synthetic shorting and other derivative holdings.
The China and India funds will be sold into a number of markets internationally, including the UK retail market, and are in the process of obtaining section 264 authorisations from the FSA.
For the Insynergy Absolute India Fund to efficiently invest into the Indian market, a Mauritius company has been established. A robust structure is being established in partnership with Multiconsult to comply with Mauritian, Indian and Ucits requirements and enjoy the benefits of the tax agreements between India and Mauritius.
GFM: Who are your key service providers?
SH: State Street is the third-party administrator with responsibility for fund accounting and custody in Dublin and the UK. It is also the depositary for both schemes and the transfer agent in Dublin, while IFDS is the transfer agent in the UK. The auditor is BDO and its associated companies in Dublin and Mauritius; Herbert Smith is the key legal adviser in the UK with McCann Fitzgerald the legal adviser in Dublin.
The prime brokers for the schemes are generally chosen by the sub-manager, although Insynergy will have input and be the contracting party. A broad spread of prime brokers will be used rather than just one house to ensure efficiency of trading for the managers and diversification of risk for clients.
GFM: Have there been any recent changes to the management team?
SH: Steve Croucher has been recruited as Insynergy’s chief operating officer, in recognition of the fact that the increasing complexity of the fund infrastructure made it important to have an experienced COO. There will be further expansion as the company continues to grow.
GFM: How and where do you distribute the funds? What is the profile of your current and targeted client base?
SH: The core of the distribution is via UK platforms, with the original deal with Axa and a subsequent one with Hargreaves Lansdowne having proved very successful. Links are being established with Cofunds, Standard Life, Nucleus, Ascentric, Aviva and others. Institutional and international relationships are being built, and this will be a major growth area for the company over the coming years.
GFM: How would you assess the impact of the recent global financial crisis and economic downturn on your business?
SH: The global financial crisis has impacted all businesses, and more importantly clients. With client sentiment toward investing at such a low, it is important for companies to respond to investor demands and give them products that aim to preserve and increase wealth.
Last year was a tough one for most companies, but to have finished with around GBP80m was a good result; 2010 is already proving better in terms of continuing sales and the launches of the Insynergy Absolute China and Absolute India funds earlier this month.
GFM: What is your investment process?
SH: We research investment strategies across the globe and identify truly world-class investment teams and strategies with proven track records. The key is to ensure that the strategy can be adapted to a Ucits retail approach and that the commercial position is secure for Insynergy to market the proposition exclusively.
Through an extensive network of contacts and our desk-based research, we examine and review strategies across all market segments. We identify numerous firms with excellent track records in strategies that have not previously been available to retail clients. The key is finding strategies that have established great track records through skill, not by luck.
GFM: What is your approach to managing risk?
SH: Where possible the company operates Ucits funds to ensure that the schemes have a robust approach to risk. The UK non-Ucits retail scheme structure is almost akin to Ucits in its current form, and the FSA rules for these schemes are sensible and prudent. The company works with world-class managers who are very capable of identifying and managing risks. They tend to employ the latest systems and processes to evidence positions.
The company has daily monitoring of all derivative positions. Through the independent price review of the fund accounting teams at State Street and the independent checks completed by the depositary, there are robust controls at every level. Insynergy has a suite of internal controls set out in a compliance monitoring plan and the risk management plans for the scheme and sub-funds.
The biggest risk is not delivering on the objectives of funds for clients. It is important not to focus on derivatives or any one aspect as being a ‘risk’ – many of these instruments, if used properly, actually decrease risk for clients. Most of the funds have an absolute return mindset in trying to minimise the downside risk without constraining the upside opportunity.
GFM: How has your recent performance compared with expectations and track record?
SH: We are very happy and confident in Crispin Odey’s investment style. The markets have proved very interesting and a real minefield for many fund managers, but the Odey approach has continued to deliver solid results.
GFM: What opportunities are you looking at right now?
SH: There is a further pipeline beyond the Insynergy Absolute India and Absolute China funds, but these are commercially sensitive. It is likely that the company will launch at least a further two funds this year and expand the range again next year.
GFM: How do you assess investors’ current expectations?
SH: Investors have had a tough time since late 2008. It is too easy to forget that they have lost the value of their investments, and it is this that has led to the decreases in fund managers’ assets under management. Many are trying to protect their positions by moving to cash or cash-like investments, but it is difficult to see how they will recapture lost value through these types of investment.
Many markets have had strong rallies, but investors need to have confidence before trusting the markets again. With continuing economic uncertainty, there is unlikely to be a full recovery for a number of years. However, with the increase in market stability and the good opportunities presented by the downturn, better choices are starting to emerge that will start to tempt clients back into funds.
GFM: What differentiates you from other managers in your sector?
SH: Insynergy is bringing a range of world-class managers to the market, from all corners of the globe and with proven track records. The unfettered nature of the business means that each fund uses the best manager for that sector.
GFM: How do you view the environment for fundraising over the coming 12 months?
SH: It will continue to be tough, but sentiment has improved and there is still a lot of money in cash or cash-like products that will move to more equity-based products.
GFM: Are you considering any mergers or acquisitions in the foreseeable future?
SH: No, we are building a new range of funds and it is always difficult and confusing for clients to be exposed to merger and acquisitionactivity. Ucits IV will offer great opportunities for fund groups with inefficient ranges to tidy up their proposition, but the inconvenience for clients is something that we will continue to try to avoid.
GFM: Do you have any firm plans for further product launches?
SH: It is likely that we will launch at least two more funds this year and additional funds in the next two years. We aim to develop high-quality products that clients want – the sort of funds that deliver and can grow to comfortably viable sizes. We do not intend to take a scattergun approach to building a range where some funds work and others disappoint.
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