While there are many routes into investment management, the industry is not an obvious place for someone with a background in medicinal cannabis research to end up. City Asset Management’s chief investment officer (CIO) Hilary Coghill actually started her career in one of the furthest places imaginable from the world of private client management.
Following a first degree in physiology and postgraduate study in pharmacology, she began researching the benefits of the medicinal use of cannabis derivatives for what was then SmithKline Beecham. Then came the demands of parenthood and a move to Kuwait, where she taught maths and had two more children before returning to the UK.
‘I did a degree in physiology, there was no way I would have contemplated going into banking,’ she says of her career choices at the time. ‘I used to have a few clients who said to me “well, what qualifies you to do investment management?” I come from a background where the discipline is very analytical, it’s looking at results, it is a transfer of skills. It’s very much the sort of discipline which is used in investment management.’
City Asset Management (CAM), while now very much a family business, actually stems from a partnership between Hilary’s late husband Vivian Coghill and two stockbroker and independent financial adviser associates.
A trained accountant who earned ‘peanuts’ in his original trade, Vivian decided to use his expertise in IT and finance to go into business after returning to the UK in 1988.
‘He didn’t know a lot about one thing but he knew a lot about a number of things and he got involved in the early days of IT when you had computers taking up a whole room,’ Hilary remembers.
One of the members departed as the regulatory burden on the industry became more demanding and as Hilary became more interested in investment, her role grew from admin assistance to a research role, to eventual CIO. She now oversees the investment strategy for 1,500 clients, with a minimum portfolio size of around £100,000, at a business that runs £350 million in assets under management (AUM).
CAM has ambitions to eventually double its AUM under the leadership of eldest son Nick Coghill, who came on board as chief executive officer in June this year, following the death of his father.
Although working with a parent may not be everyone’s cup of tea, Nick had always had ambitions to join the family firm. He says working with his mother is ‘never dull’, and is comfortable enough to refer to Hilary as ‘mum’ during the interview.
‘To be honest, I did not have any reservations as we had discussed this for a long time,’ he says.
‘The thing that made me feel really comfortable was the number of letters and calls saying how sorry they were and how great my dad was, but also that my mum was one of the best investment managers and client-facing professionals around.
‘My only regret is that my dad and I never worked together as he was an exceptional chief executive and people person.’
His career has mirrored his father’s, going to the same university – ‘I didn’t study cannabis,’ he jokes – then beginning in accountancy and later moving into investment, albeit in a slightly more modern way with a role pricing derivatives at Société Générale.
‘I was always interested in markets... You could say that it was in my DNA,’ he says, before the pair make what sounds like a long-running family joke at the expense of dad: ‘I was a proper accountant, I was ACA qualified while he [Vivian] was only ACCA.’
When run by his father, CAM was a business that grew through amalgamation and was open about looking for potential acquisitions. ‘In the early days we were really just discretionary managers and grew by providing a home for a number of IFAs or individuals who had clients,’ Hilary recalls.
Nick, however, is planning to take a different tack. He is coy on timeline targets – shying away from the company’s previously stated plans for £700 million in AUM by 2016 – and is adamant the best thing for business culture is slow, organic growth.
Acquisitions are unlikely, something Nick would want to ‘tread very carefully on’.
‘Ultimately, we want to make sure we know our clients intimately and that they know everything about us,’ he explains. ‘We don’t want to be too big.’
He adds that in his experience, it can be hard to integrate new teams that have been acquired.
Bolt-on acquisitions could also mean CAM diverges from its USP – it’s a family business, an antidote to client dissatisfaction with big banks, and has no ambitions to become an investment behemoth.
Nick says ‘A lot of our clients say “we don’t want you to say you want to double assets”. A lot of our business growth historically has been through reputation and referral business.
‘That’s continuing to grow with the disillusionment with the big private banks. Big is not beautiful in the wealth management world and people want to be a name, not a number. Where we are seeing clients come in is from a lot of the big private banks, or where there has been a lot of staff turnover – people don’t want that.’
The focus on culture is also evident in how the Coghills have become keen to train young graduates and regularly take on students on placements, despite initial scepticism from head of research James Calder.
‘We find that they get up and running very quickly. James was very dubious we would spend the whole time training them and they would go,’ Hilary says.
‘Their skills are probably better than some of the people here because their skills are right at the forefront.’
Three years ago, the company divided with the establishment of a dedicated advice arm, City Wealth Planning, and today a third of business is from IFAs, an area that has grown ‘dramatically’ over the past few years.
They hope to glean more business from IFAs, as the company has launched its cautious and balanced portfolios onto a number of platforms, including Skandia earlier this year.
‘I see our source of growth for the business in a couple of areas; one is in the retail distribution review space with IFAs,’ Nick says.
‘What we do we do well as we can run some specialist mandates with the flexibility that a lot of big houses can’t do, so I’d like to position ourselves within that service proposition area.’
Hilary describes the client base as ‘between cautious and balanced’ in risk terms, and as such the average private client portfolio has a 20% weighting to fixed interest and 17% to UK equities.
Perhaps as a nod to Nick’s long experience in structured products and derivatives sales, allocations to the US, UK and Europe will usually have a chunk in structured products, mostly as a means to provide downside protection.
‘We see the sideways trading pattern going on and this is a good place for structured products, with range-bound products and autocalls where a lot of them have declining barriers,’ Hilary says. ‘They have been less attractively priced now but we tend to be quite opportunistic in our buying of structured products.’
The average balanced portfolio has 40% in overseas equities, 15% in alternatives, and 6% in commodities – although the latter is a controversial subject among the team.
‘It’s one of the most commonly debated topics in-house,’ Hilary says. ‘It has been disappointing over the longer term. The gold fund has done well for everybody. We probably look at gold as a hedge against the uncertain world in which we live.’
Commodity funds the team uses include the Investec Global Gold, Threadneedle Commodity and John Dodd’s Artemis Global Energy. Core alternative managers are Troy and Ruffer, and these have done well, while BlackRock UK Emerging Companies is the only hedge fund on the books.
‘BlackRock has been a long-term holding for us and has made a lot of money but has underperformed long-only managers,’ Hilary explained.
‘We have gradually reduced exposure to hedge funds, partly because of the intrinsic cost structure of them and partly because returns have been difficult for hedge fund managers in these volatile markets, and with interest rates going down they have lost a lot of their income.’