Investment week matrix article - 21 march 2011

46 1 Investment Week 1 21 March 2011

CHIEF EXECUTIVE INTERVIEW

In a short space of time as CEO of Matrix Asset Management, Angus Wool house tells Emma Dunkley how expanding the group's distribution capabilities has been essential to navigating Matrix in the right direction

WOOLHOUSE BRINGS FRESH DIRECTION TO MATRIX ROLE After only a couple of months at the helm of Matrix Asset Management, chief executive Angus Woolhouse is already steering the firm in a clear direction. One of his first pri­orities in the newly created role he took on last December was to expand Matrix's distribu­tion capabilities, by offering a broader range of products to a wider network of investors.

"One of the first things I wanted to do when I arrived was to reinforce to everyone asset management was one division - there were areas of crossover between the prod­ucts we make and our distribution networks. We needed to reorganise ourselves as one division, rather than as a series of individual groups," he said.

With over 25% of the local authority mar­ketplace as clients and an established rela­tionship with the major intermediary groups in the UK, Woolhouse aims to leverage upon the firm's existing investor base to grow the business. "What I would like to do is move to a broader, full service offering, so these groups and distribution channels are aware of Matrix's full potential. This is an opportunity we can now really leverage."

Woolhouse is not just limiting his vision to the UK. As part of his ambitious expansion plans, the CEO is keen to push the firm's dis­tribution capabilities to Europe and Asia, while seeking to hire a raft of new managers as part of the process. "I am very keen to recruit and attract good fund managers, particularly in the absolute return hedge fund and UCITS space. We are looking for managers that cover UK long and short absolute return, pan-Euro­pean absolute return, and macro."

Finn objectives Having set out his plan after only 12 weeks in charge, Woolhouse has certainly cemented his position back in the retail arena. Prior to joining Matrix, he was running the global institutional business at Gartmore, providing long-only funds and hedge funds to some of the largest pension schemes around the world. "I was at Gartmore for seven years until December 2010, which was fantastic, despite what sadly transpired at Gartmore."

His tenure at Invesco Perpetual before Gartmore gave Woolhouse experience in building newly merged brands. "I joined Invesco in 1999 and was involved in the Per­petual acquisition - running products and marketing them across Invesco in the UK, dealing with all the integration challenges, establishing the brand and really leveraging some of the positive attributes of the busi­nesses at the time of a massive acquisition."

During his stint at Invesco Perpetual, Wool­house worked with Mike Webb, now CEO of Rathbones, in amalgamating two disparate product ranges into one set, while retaining the key fund managers. "This was my first exposure to UK retail, the broader interme­diary market and the needs of IF As."

Woolhouse first learnt his trade in new product development at Pepsi from 1990 to 1993, followed by a period with HSBC based

in Hong Kong, where he was responsible for developing mutual fund sales across the Asia Pacific region. "It was a pioneering role, bringing HSBC Asset Management's manufac­turing ability to bank distribution for the first time, when Hong Kong and the whole of Asia Pacific was growing really fast."

After gaining experience in the institu­tional and retail spheres, Woolhouse main­tains he was lured to the CEO role at Matrix, rather than pushed into the position by Gartmore's ailing business. "The opportunity to effectively run your own business and be responsible for 95 people and a £3.25bn asset management firm was too exciting to turn down. What happened at Gartmore is just what happened- I had gone by then."

Growth roots As an asset management firm with roots in pioneering tax-structured products for intermediary distribution, Matrix appealed

"One of the first things I wanted to do when I arrived was to reinforce to everyone asset management was one division ... We needed to reorganise ourselves as one division, rather than as a series of individual groups"

to Woolhouse thanks to its retail-based offerings and the opportunity to grow the business. Established in 1987, Matrix was a pioneer in the venture capital trust space, which no-one else was offering at the time, he said.

"It then evolved very quickly from being a dominant player within that narrow product space, as the group understood it could lev­erage its expertise across broader-based product lines. It then looked at investment banking, property and a range of different investing options, although its core business has always been intermediary distribution."

Matrix has a dual strategy in terms of dis­tributing internally manufactured products and those from third parties. "The benefits of both manufacturing and distributing your product have always been understood. But Matrix has been clever and led the market in understanding if you cannot make a product, distribute those made by others. If expertise lies outside then distribute it to the intermediary community, where our relationships are strong. No-one else has really done that."

This model has enabled Matrix to estab­lish some strong long-term partnerships with groups that were not otherwise able to access a mass market retail audience. "We provide product structures that enable retail investors to invest into some of these firms. If you have got strong distribution relations, a commitment to the IFA market­place and demand for products you cannot

BIOGRAPHY

currently manufacture, then there is a very compelling argument that says you can con­tinue to satisfy your clients needs, but you do it via somebody else's products."

Capital preservation In 2006, Matrix shifted from its core VCT offering towards absolute return hedge funds and UCITS III funds. "We realised retail wanted absolute returns and the prin­ciples of capital preservation, but in a regu­lated UCITS III format. That is really what the group has focused on in the last 18 months to two years." Of Matrix's £3.2bn assets under management, hedge funds now account for around £657m. Matrix's assets are also up over 25% year on year.

"VCTs are designed to reward investors who are prepared to put money into compa­nies in need of capital. Banks' lending has been constrained over the last two to three years, therefore private investors have been

e Joined Matrix in December 201 0 as CEO of Matrix's Asset Management division. Prior to joining Matrix, was head of global institutional business at Gartmore. • Was previously group marketing and product development director at lnvesco UK, where he was responsible for marketing and product strategy across all distribution channels. • Held a number of senior marketing positions at HSBC Asset Management, based in Hong Kong.

t he largest source of available capital to companies desperate for cashflow. The gov­ernment has a responsibility to continue to provide some sort of incentive for investors, so I do not see the VCT product as coming under pressure."

The firm's number one product is its Asia UCITS fund, a long/short hedge fund covering Asian equities, including Japan. The fund is a high conviction product that has delivered 16.7% per annum in annualised returns since inception in 2008.

"We have just concluded a significant seed deal with a leading European institution. As the fund grows - it is now over $100m in size -it starts to gather momentum. We spent a year really marketing the Cayman and the UCITS version of the fund and we are now about to move to daily dealing, which is a very impor­tant att ribute for the retail client base. Daily pricing makes the product more like a passive unit trust product - we will be doing this by the end of March."

Woolhouse added Matrix is in discussion with key platforms including Towry Law, Standard Life, Skandia, Hargreaves Lansdown and Bestlnvest to offer its Asia UCITS fund to retail investors.

The fund's manager, Rupert Foster, is one of the few that can derive alpha from the short book, said Woolhouse. "He is as aggressive in the stocks he does not own as the stocks he does - he used to make a

third of returns from the short book. A lot of fund managers just buy the index or shor t the index- they do not short the indi­vidual physical stocks. It is clear which sec­tors will do well and which will not do well, in response to some of the broader macro themes we see in the emerging markets.

"We like Asia a lot, because GDP forecasts across the region are still at 6.5% and we think it is a very exciting area for us to be focused, both as a business, and in terms of the fund."

For those investors looking for genuine growth opportunities, Woolhouse remains committed to the Asia growth story, so much so, Matrix is planning to open an office in Hong Kong.

"This is something we are working on now - it will predominantly be an investment office for Rupert Foster and his team, and over time, it will evolve to become more of a distribution arm."

In a broader sense, Woolhouse said he has concerns about rising inflation, a commodity bubble forming and the impact of the deficit on UK households, all of which could drag on economic growth.

While there are many views on when interest rates should be raised, Woolhouse believes the full impact of the deficit reduc­tion programme, on everything from goods and services to disposable income, will really hit within the next six to eight months, which could corrode confidence.

lnvestmentWeek 21 March 2011 47

CHIEF EXECUTIVE INTERVIEW

MATRIX ASSET MANAGEMENT e Funds of funds • Hedge funds e UCITS funds e Structured products

FUND RANGE

• Cash funds e Investment management e Private equity and VCTs e Specialised finance

e Matrix Asia fund, focused on Asian markets. e Matrix Macro fund, a global macro equity fund. e Matrix New Europe fund, focused principally on the markets of Russia, Poland, Czech Republic, Austria, Greece and Turkey. • Matrix PVE Global Credit fund, focused on global credit markets. • Matrix Redux EM fund, a macro fund focused on emerging markets.

KEY FEATURES: e All funds are domiciled outside the UK and listed on the Irish Stock Exchange. e Appropriate for a SIPP, expert or institutional investment. e $100,000 minimum investment. e Fund manager is authorised and regulated by the FSA.

MATRIX ASIA UCITS FUND e Asian equity long/short fund - typically holds 40-60 stock positions. e Focus on Japan and China as the two main markets, but also includes Korea, Singapore, India and Taiwan. e High conviction fund with a thematic and macro overlay. e Focus on adding value through the short book. e Rupert Foster has 16 years investment experience in Japanese and Asian equities, seven of them as a long/short fund manager.

))FOR MORE ON MATRIX ASSET MANAGEMENT Search www.adviserhound.com

Capital preservation Despite a definite thirst for income among investors , Matrix does not offe r income products , choosing to focus on absolute retu rns . "One of the mos t impor tant prin­ciples during t imes of market stress and volatility is th e pri ncipal of capital sta­bility. We are looking to preserve our cli­ents' wealth at a t ime when I t hink we are going to see equity markets undergo some volatility over the next 12-18 months."

"I think rising commodity prices ar e now really fully being understood by con­sumers, because the price of food and petrol among other things has accelerated to such a degree that, on top of t he reduc­tion in d isposable income, you feel you are caught in a vice. The macro environ­ment in t he UK is going to be challenging over the next 12-18 months, I do not see that stopping, but if people are prepared to make investment positions, I th ink Asia presents a much broader opportunity."

Along with Asia, Woolhouse is bu llish on his ability to grow Matrix 's asset man­agement arm in the role of CEO. "Eve­ryone here recognised they needed a CEO for asset management and that there was a lot of potent ial within t he division but it needed to be harnessed. One of the fi r s t things I have done is reinforce internally to everyone there is a real opportunity to be able to leverage what is the most unique manufacturing product development capa­bility I have come across in my career.

"We have more sophisticated product creation skills in th is fi rm than anywhere else I have worked. But where we have per­haps faile d historically is being able to lev­erage those skills to the broadest possible distribution audience."

He added: "I was attracted to Matrix's diversified fin ancia l ser vices group , with its pr operty busin ess, investment banking business, and asset management business . Strategically, it is so important for a group to h ave three strong legs to the same stool."