Since taking over the fund on 1 January, Alex Wright has picked Brewin Dolphin for the fund’s higher beta financial holdings, while selling out of F&C Asset Management and Jupiter Asset Management.
“There’s been massive internal changes at Brewin Dolphin,” Alex Wright said in his first press briefing since taking over from Sanjeev Shah.
This is what makes the firm attractive, along with its lower margin which in part due to its decentralised business model, operating on 15% margin compared to the likes of Rathbones operating on a 30% margin.
“Currently Brewin Dolphin is operating at a 17-18% margin, with a 25% target,” he added.
Fund manager pressure
When it comes to fund managers, Wright does not hold any in his fund after selling out of F&C and Jupiter.
It’s a trend in the industry, according to Jason Hollands, managing director at Bestinvest.
“We’ve seen a selling out of fund managers, who are facing increasing pressure,” he said.
Despite being a long time investor in F&C, it came as “no surprise” that Fidelity sold out when the fund manager was acquired by the Bank of Montreal and its share price started trading at the offer price.
Wealth managers, on the other hand, are growing more valuable and more powerful as the industry consolidates and large players emerge from M&A activity. Progressively more IFAs are working with wealth manager firms to outsource portfolio management. The sector is seeing good growth dynamics, and regulatory changes are opening new opportunities.
A popular choice
“Brewin Dolphin is popular in a number of smaller company funds,” Hollands said, pointing out Unicorn’s UK Income Fund run by John McClure which lists the wealth manager as a top holding.
A quick search on FE analytics reveals that seven funds in the UK IMA sector hold more than 0.5% in Brewin Dolphin.
The Smith and Williamson Revera UK Dynamic Fund boasts the largest percentage of 4%. Fidelity’s UK Income Fund falls next in line, with 3.7% listed in its holdings. The Unicorn UK Income Fund and Guinness Global Money Managers Fund both hold 3.4%. The Kames UK Smaller Companies Fund and Kames Ethical Equity Fund hold 2.73% and 2.07%, respectively. Finally, the PFS Chelverton UK Equity Income Fund completes the list of seven, with a 1.31% share in the firm.
