Clive Moore, managing director at Investment Design & Distribution (IDAD), has joined multi-manager boutique 8AM Global as a partner as the structured products specialist boutique continues to expand its international distribution.
8AM Global, formerly Hasley Investment Management, was launched in December by asset management veterans Richard Philbin and Tom McGrath, who will be joined by Jeremy Nunn and Moore as partners with stakes in the joint venture. “We have been looking to get involved in a more traditional fund set-up for a while and 8AM Global was a good fit as it is a well-established asset manager, has a boutique approach and a very good track record,” said Moore. “8AM Global has been launched on the back of Hasley Investment Management, which managed portfolios with very tight volatility bands and has done so very successfully.”
IDAD sees the partnership as a way to develop and increase its existing fund range through a multi-asset management proposition, said Moore. “Advisers internationally are looking much more to non-traditional multi-asset manager funds and specialist funds,” said Moore. “Future plans include adding our fund of structured products and we are already in discussions with people to add this fund to the range.”
Moore also expects to leverage IDAD’s structured products acumen. “It is exciting for us to be joining a manager that works with volatility-managed funds as it’s a very attractive segment of the market,” he said. “This segment is about providing capital protection features within a wealth management fund portfolio which is in line with what we do.”
“We have the experience when it comes to product development and we have experience in the things that can be done in the fund’s market,” he said. “We hope the synergies will benefit both firms although the businesses are run separately.”
The 8AM Global range will be renamed from numbers I to IV to Global Defensive, Cautious, Balanced and Global Growth.
Although no timeframe has been established, 8AM Global will introduce a UK fund of structured products at some stage to take advantage of Moore’s expertise. “We remain convinced that structured funds and funds of structured products are a valid vehicle to address investors’ needs,” said Moore. “The Citi autocall UK Fund, for instance, is a very robust fund and I am invested in it personally. Funds offer the peace of mind of being sold under the Ucits framework, which gets the counterparty risk removed. These funds also offer full collateral, an attractive return based on an autocall payoff and very tightly controlled intraday prices which you don’t get with structured notes as they get the intraday pricing from pricing models.”
Moore said that there is a combination of factors that make structured funds a very appealing product for investors but for providers things are more complex because of the distribution methodology. “In the traditional fund management model, funds are designed with a margin to cover the distribution and marketing costs,” he said. “But in the structured market, the retail segment has been driven by commissions. That’s why autocall products are very popular, as advisers are not only providing a good headline rate but may be able to get a commission almost every year.”
That set-up, said Moore, does not work in the fund market as commissions are not paid every year and that takes away one of the key points of attractiveness for advisers. The fact that commissions have less of an influence on advisers since the Retail Distribution Review, said Moore, may also boost the use of structured products in a fund format. “We have seen that if you want to have an autocall payoff it would make sense to have an autocall fund instead of a note issued by a bank,” said Moore. “Based on this appreciation, structured funds could get more traction in the market but sometimes banks don’t have the capabilities to go around the country talking to financial advisers.”
Moore believes there is a gap in the market to provide more value with a fund of structured products rather than using a fund to wrap a particular payoff type. “I think there are opportunities out there and with a conservative distribution approach we may see more structured product types of investments in the fund market,” he said.
Moore also expects that volatility will continue driving sales and that providing access to the primary and secondary markets will also yield opportunities around pricing anomalies that can be exploited. “Some markets will recover better than others, but we don’t expect significant changes in the main equity indices,” he said. “However, we will see periods of high volatility and we want to be able to extract value from those situations.”
IDAD recently expanded its sales team with the appointment of Andy Gibson as global head of sales and Stacey Arcus as sales manager for the Middle East. In addition, Anna Wright has joined the structured products specialist as marketing manager. “IDAD has become more mature as a business and the recent appointments reflect our efforts to be able to match the requirements of our customers,” said Moore.