Thursday, 1 September 2016
Last updated 3 hours ago
Apr 2 2009 | 3:12pm ET
Little-known Liontrust Asset Management’s roar is getting louder on this side of the Atlantic. The US$2.7 billion U.K.-based hedge fund last year opened an office in Wilton, Conn., and hired Richard Hoag, former co-head of institutional sales at Merrill Lynch Investment Managers to manage its North American business.
FINalternatives this week spoke with Hoag about the publicly-listed firm’s expansion strategy, new product launches and its deal with the European long/short fixed income team from Ilex Asset Management.
FINalternatives: Tell us about Liontrust.
Hoag: Liontrust started out 15 years ago primarily as a long-only U.K. firm. About four years ago, we brought on two gentlemen from hedge fund Polar Capital to develop our European strategies.
We started our European long/short strategy in December 2006 and returned 13.35% last year. We now manage about US$100 million in that strategy and we just started marketing it. We’ve received US$25 million in funding this year and we’ve got another US$30 million in commitments. We’re only going to raise about $500 million.
Until a year ago, the firm had never set foot on U.S. soil. I came on board last January to start a North American operation for them from the ground up. We cover the U.S., Canada and Latin America.
FINalternatives: Why has your firm, a relative newcomer to the U.S. market, been so successful in fundraising while other, more established funds have run into trouble?
Hoag: Investors are interested in us not only because our performance is outstanding, but because the process is extremely unique. We refer to it as our European cash flow solution, and all our managers do is forensic analysis of statements, accounts and cash flow in relation to the over- and under-exuberance of company management. We also have full transparency: We will give full portfolio listings in our fund and managed accounts. We can liquidate most of our portfolio in four to six business days.
More than a year in, we’re gathering assets and have already been hired by a couple of institutions in the U.S. Fortunately, the senior management and the board has been very patient, knowing that you don’t get a second chance to make a first impression. We’re positioning ourselves as a process-driven manager with full transparency.
I’ve been in this business since 1982 with very large firms and boutique shops, and it’s not too different now from then. I’ve been through cycles, and the way we market going forward is going to depend on the types of products we have and how specialized they are. Liquidity is everything right now, and you simply have to get your story out there to pensions and funds of funds, and be honest about it. There’s a market out there for good managers.
FINalternatives: How do the institutional investors you are targeting view Liontrust?
Hoag: Some pension plans might view us as an emerging manager because of our smaller asset base in the U.S. At first, it’s been, “Liontrust who?” but that’s where the opportunity is. We’ve really had a great reception; people want to hear about a de novo manager.
We are challenged by name recognition. Our marketing approach has been from macro to micro, so we’re introducing ourselves in these first two years and establishing our credibility in the pension consultant community as well as with the Employee Retirement Income Security Act market, family offices and funds of funds. We’re also on a number of platforms for financial institutions as a sub-advisor.
FINalternatives: What new products is Liontrust developing, and how will the relationship with Ilex fit into those plans?
Hoag: We have a very strong balance sheet, allowing us to look at investments opportunistically. Our CEO and their CEO know each other, and it was just one of those things that opportunistically came along. With Ilex, we have the capability for a global credit product. It’s currently managing about $90 million and they’ve been in operation since June 2000. So we’ll be looking at various different strategies with those folks.
On the equity side, we’ll be adding a global product down the road within the next quarter or two and we’ll also be incubating a long/short strategy off of that applying our cash flow analysis.