HFS Milbourne has found its niche as a firm closely connected with the legal profession in Guildford. Co-managing directors Rod Milne and Colin Hayden-Cook say it has sponsored the Surrey Law Society, boosted its technical qualifications and knocked on the doors of law firms in the area.
Now many of these lawyers are clients of HFS Milbourne and use the firm’s model portfolio system, which was launched in 2009. This Strategic Portfolio Service (SPS) has 10 risk-rated portfolios, an income portfolio and a fixed interest portfolio, which Milne says works well for those in the legal field.
There are around 23 different funds in each portfolio, and this diversification helps manage risks including volatility. Funds are usually active, reflecting the firm’s investment philosophy. But Milne says nothing is off limits.
Funds that have done well are the Natixis Loomis Sayles US Equity Leaders fund, managed by Citywire A-rated Aziz Hamzaogullari, and the Old Mutual UK Smaller Companies fund, managed by Citywire AAA-rated Daniel Nickols. But they do throw in the occasional Vanguard global tracker.
‘We have also used an HSBC US index tracker,’ Milne said. ‘But we swapped that out for more active fund managers.’
The firm likes Neil Woodford as a manager and has stuck by his equity income fund, as well as other funds, during periods of underperformance. These include the Jupiter European fund, managed by Citywire AA-rated Alexander Darwall, and the Schroder Asian Alpha Plus fund, managed by Citywire + rated Matthew Dobbs.
Milne stresses the need to strike a balance between being ready to ditch favourites if they underperform and avoiding kneejerk reactions. A traffic lights system helps monitor managers, who sometimes come to investment committee meetings to talk about their funds. The investment committee includes Milne, Hayden-Cook, fellow directors Iain Halket and Daren O’Toole, and Psigma Investment Management head of investment strategy Rory McPherson.
‘Early in 2017, we reached £200 million in our SPS portfolios and decided it was time to appoint a non-executive investment committee member,’ said Milne. ‘So we went into the fund management marketplace, did a beauty parade and selected McPherson. He’s a steady pair of hands and we love what he’s done for us so far. We’re not making dramatic changes on the investment side. But when we go through bumpy rides like [the US presidential election of Donald] Trump and Brexit, he will be able to help us.’
In the past two years, the firm has focused on making marginal gains. ‘An extra 0.5% here and there is something Rory and active funds help us with,’ Milne said.
Hayden-Cook says the firm’s risk management programme is robust and they see 97% to 98% response rates from clients before doing a bulk switch. ‘It’s a slick process but you need the resources,’ he said.
As a result, the managing directors are content with their processes. But Milne said: ‘We’ve looked at outsourcing and at becoming a discretionary fund manager (DFM) at some point, as many DFMs manage less money than we do.’
Indeed, the SPS now holds around £240 million of the firm’s £350 million client assets under advice. ‘But, from an administrative point of view, we can’t see how we would make massive savings by becoming a DFM.’
‘If it ain’t broke, don’t fix it,’ Hayden-Cook added. And it does not seem HFS Milbourne will be breaking any time soon.