Ready to push the bound­aries out

Firm has no am­bi­tions to be huge, but is con­fi­dent it can de­liver on a big­ger scale

Financial Mail - Investors Monthly - - Special Report: Purple Group -

Em­peror As­set Man­age­ment (EAM) is the yard­stick by which to mea­sure Pur­ple Group’s evo­lu­tion from an in­vest­ment and pri­vate eq­uity com­pany cre­ated by Mark Barnes in 2005. The in­ter­ven­ing decade has seen the group evolve into a niche as­set man­age­ment and trad­ing player.

Group CEO Charles Sav­age ac­knowl­edges that Pur­ple is a small and rel­a­tively un­known group, but says this pro­file is chang­ing steadily as the per­for­mance of its as­set man­age­ment prod­ucts has started to garner in­ter­est and at­tract funds. Em­peror As­set Man­age­ment rep­re­sents Pur­ple’s most sig­nif­i­cant di­ver­sion from de­riv­a­tives trad­ing, op­er­ated through, which was the main­stay of the group un­til 2010.

It was at this time that Sav­age was ap­proached by Tom de Lange, who was look­ing for a part­ner to add sta­bil­ity and scale to his small as­set man­age­ment firm. Sav­age ad­mits to ini­tial reser­va­tions about en­ter­ing the as­set man­age­ment busi­ness un­less it of­fered dis­tinct value to in­vestors and com­ple­mented the Pur­ple Group vi­sion.

In the end, De Lange’s con­sis­tently strong per­for­mance record of an­nual re­turn rates of about 23% and his pi­o­neer­ing quan­ti­ta­tive mo­men­tum-based ap­proach won the day. EAM emerged from this amal­ga­ma­tion of busi­nesses, but it was another year be­fore it was ready for the mar­ket. Much time was spent build­ing Em­peror’s in­vest­ment of­fer­ing, tech­nol­ogy base and client-re­lated ser­vices to en­sure the busi­ness was ro­bust and scal­able enough to meet the re­quire­ments of both mass re­tail and in­sti­tu­tional clients.

To­day Em­peror com­prises three dis­tinct prod­uct of­fer­ings, in­clud­ing seg­re­gated port­fo­lios, unit trusts and a hedge fund.

The main­stays are the seg­re­gated port­fo­lios com­posed of the Robert Fal­con Scott Strat­egy and the Sir Ed­mund Hil­lary Strat­egy. Both have adopted a quan­ti­ta­tive, mo­men­tum-based in­vest­ment style fo­cus­ing on 140 of the most liq­uid JSE shares. The for­mer — launched in Oc­to­ber 2004 — has an en­vi­able 10-year track record and de­ploys a pre­dom­i­nantly long strat­egy, while the lat­ter is a long/short strat­egy and has been in the mar­ket since June last year. Though the per­for­mance of these strate­gies is of ut­most im­por­tance, Em­peror has adopted an ap­proach of com­plete trans­parency with its clients, pro­vid­ing each with a daily state­ment re­flect­ing the per­for­mance of their port­fo­lio.

Cater­ing to the more tra­di­tional in­vest­ment-minded, the as­set man­ager launched its Em­peror IP Mo­men­tum Eq­uity unit trust fund in Septem­ber last year and dur­ing the first part of this year in­tro­duced the same unit trust in the form of a tax-free sav­ings ac­count.

Fi­nally, EAM launched its first hedge fund on Novem­ber 1 2014, ap­peal­ing to more so­phis­ti­cated and in­sti­tu­tional in­vestors.

“EAM has been a great

suc­cess, in the sense that we have been qui­etly go­ing about grow­ing our as­sets at a steady but mod­er­ate pace. We are now ap­proach­ing the point at which both re­tail and in­sti­tu­tional in­vestors are start­ing to show in­creased ap­petite and in­ter­est in what we’re do­ing,” Sav­age says.

“We are build­ing out an ‘al­ter­na­tive’ as­set man­ager that has a true re­tail dis­tri­bu­tion plat­form, aligned with our more tra­di­tional in­vest­ment busi­ness through unit trusts. Most of our busi­ness is in seg­re­gated port­fo­lios and more specif­i­cally in strate­gies that are ded­i­cated to meet­ing the higher risk, higher re­turn re­quire­ments of in­vestors.”

He says EAM man­ages more than R620m in as­sets for about 2 500 cus­tomers. This as­set base has grown from R20m when the busi­ness was cre­ated in 2010.

Two in­ter­na­tional funds will be launched this year. This will help the group to sup­port its clients’ in­vest­ment needs and grow as­sets un­der man­age­ment.

“R2bn as­sets un­der man­age­ment seems to be the tip­ping point for an as­set man­ager and our fo­cus is on achiev­ing this kind of scale. We’re a small, bou­tique man­ager and we have no as­pi­ra­tions to be a mega man­ager. How­ever, we’ve tested our in­vest­ment strate­gies’ ca­pac­ity to de­liver sim­i­lar re­turns on a big­ger scale; hence we are con­fi­dent that we have huge ca­pac­ity to grow as­sets un­der man­age­ment with­out a neg­a­tive im­pact on re­turns, which is great news for our busi­ness and our clients. Our plan is to re­main fo­cused on and grow our re­tail client base ag­gres­sively, en­sur­ing our ser­vice lev­els and ap­proach are never com­pro­mised, while at­tract­ing in­sti­tu­tional clients.”

To achieve this, Em­peror will be tar­get­ing in­de­pen­dent fi­nan­cial ad­vis­ers. Sav­age says that 90% of the busi­ness to date has been ac­quired di­rectly, but that mar­ket­ing through ad­vis­ers will en­able it to ramp up client ac­qui­si­tion.

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