“Everyone thought I was mad for leaving. Nobody ever leaves Baillie Gifford, or chooses to leave a job like that. But I was 32 and I would have rather tried and failed, than to never know whether it would have worked.”
In May 2019, Felicia Hjertman (pictured) left Edinburgh-based asset management firm Baillie Gifford, where she had co-managed the Japanese Smaller Companies OEIC and Shin Nippon Investment Trust, alongside Praveen Kumar. The portfolios, which had a combined AUM of £1.9bn, had significantly outperformed their average peers over her tenure.
“I love small caps and I love Japan; it is such a quirky and special place. I also loved working both on a fund and an investment trust. With the latter, it was an interesting experience working with the board and becoming closer to the retail market,” the Tillit founder and CEO tells Portfolio Adviser.
“But while that was a really interesting and exciting intellectual challenge, I have always had this little fire inside me, this need to build something tangible myself – to create something out of nothing and try to help people in one way or another.”
The idea for Tillit – an investment platform offering a universe of carefully chosen funds to investors – came after Hjertman decided to allocate her pension herself.
“I was on an investment platform and I found it really hard to make an informed decision,” she said. “There were thousands of options – which was great – but I only knew about Baillie Gifford funds.
“I wanted that decision to be made simpler. I could see the managers, their fees, their top holdings. That somebody went to Oxbridge 20 years ago. But it didn’t tell me what I wanted to know.”
In the end, Hjertman ended up pooling information on each fund from various sources, including managers’ websites, Morningstar data and KIID documents.
“I complained constantly to my friends until they said to me: ‘why don’t you stop moaning and do something about it?’”
Hjertman noted that institutional clients are travel around the world, enlist the help of consultants and speak to the fund managers directly, in order to choose the best investments for them.
“Individual investors don’t have that luxury. How do we bring this to them? How do we build a platform that empowers people to make their own decisions without having to pay for advice?
“We want to make sure that everyone has the access to the tools, the information and the confidence to do that themselves.”
Tillit, which means ‘trust’ in Swedish, became an incorporated company in February 2020 – just weeks before the Covid pandemic hit. By this point, Hjertman had been out of full-time employment for nine months.
“I had already been living on my savings since the end of May the previous year. I had to raise capital before October 2020, because that is when I would run out of money,” she says.
“In hindsight, I’m very happy that I made the decision to resign the previous year because I don’t think I would have dared to do it otherwise. But by this point, I had no choice. I just had to push forward and, if I couldn’t get it off the ground, find a job elsewhere.
“So, I reached out to a handful of individuals who I knew were in a position to potentially support something like this, and to provide some angel money early on.”
In the end, Tillit closed a £1m funding round by October, with industry heavyweights including Schroder’s Nick Kirrage and Hjertman’s former Baillie Gifford colleagues Sarah Whitley and Patrick Edwardson throwing their hat into the ring. This amounted to double the £500,000 Hjertman and co-founder Paul O’Neill had initially hoped for.
“This would have been nowhere near enough to get the business of the ground, as it turns out,” Hjertman explains. “We were very fortunate at a time when raising money generally was incredibly difficult.
“I told [our seed investors] about my vision and my frustrations, and they were very much on board. A small selection of platforms had been dominant in the market for so long that there was a level of complacency – they were excited by the prospect of challenging that.”
Not only does the platform aim to offer “best in class” funds to retail investors to choose from, it also only charges one fee of 0.4% for the first year, which falls by 1 basis point each year down to 0.25%.
Another marked difference is the way its fund list is displayed. Rather than lead on a fund’s name, it instead offers a brief synopsis of what the fund intends to do.
“I got this idea through my love of whiskey,” the CEO says. “There is a place in Scotland called The Whiskey Society and, instead of writing the brand on the bottle, they write the flavour profile and you never know the brand.
“I wondered whether this should be the case for funds, because a fund name doesn’t necessarily mean anything to the investor. What does mean something is the fund’s goal, what it is aiming to achieve.
“We wanted to give investors, in plain English, a snapshot of what the fund is like. So that they can decide whether to move on or read more.”
The company now has physical offices in London and Edinburgh, with CTO O’Neill based in Scotland and the team split between both locations. Because the firm was founded during the throes of the first lockdown, it was a full year before the co-founders met in person.
“That was a surreal experience. But it forced us to think about how to build connections and a company culture. How do we share goals and visions while working virtually? The fact we didn’t know any different was actually quite good,” Hjertman says.
Another challenge the CEO faced was engaging in a second round of funding during a turbulent time for markets. As it transpired, Tillit scored a £3.6m fund raise last year.
A key member of the team is Sheridan Adnams, who joined as head of fund selection in June last year. Fund selectors Ben Yearsley and Gavin Haynes, from Fairview Investing, are also on the firm’s investment committee, as is former Baillie Gifford multi-asset fund manager Patrick Edwardson.
“A lot of fund selection is asking the right questions and really trying to dig into their decision-making process – it’s about separating the marketing speak from what the managers are actually trying to do,” Hjertman says. “With some of us coming from fund manager backgrounds ourselves and having been at the other side of that table, we know which tough questions to ask and which answers will be the most revealing.”
A new addition to the board is ESG expert Alexandra Danielsson, who joined earlier this month. Her goal is to help Admans cut through any potential greenwashing among sustainable funds.
“With sustainable funds, there are some that don’t have exclusions because they believe it is better to empower the transition,” Hjertman explained. “We have funds which don’t necessarily have a sustainable mandate but which will not invest in fossil fuels because they don’t invest in that way.
“This is why we built filters onto our platform for excluding fossil fuels specifically. This means that an investor can be certain the fund will never have fossil fuels in their portfolios, for example, rather than them just not holding any right now.
“So there are filters, but it is also trying to understand philosophy and process – what rules are there in the fine print? How do they weight the ‘E’, the ‘S’ and the ‘G’? There is still a lot more we can do in this space but we are certainly at a decent starting position.”
The CEO describes her stance towards sustainable investing as ‘neutral’ however, and even warns that fund labelling and the desire not to be labelled as an Article 6 fund under Sustainable Fund Disclosure Regulation (SFDR) could lead to managers chasing similar assets and inflating their prices.
Another key theme she is focusing on is the lack of value funds available relative to their growth counterparts, given ultra-loose monetary policy has – until recently – kept equity returns slowly ticking upwards.
“We also think a lot of hedge funds are sitting on very interesting strategies at the moment because they are not as constrained, but we’re yet to find the right vehicle,” Hjertman says.
“But ultimately, it is not about making a call on a specific sector or market area. It is about having a diverse universe where, regardless of who you are as an investor, you can find something that suits your goals, your risk tolerance and which can satisfy your curiosity for any number of different investment styles or products. We want to cater for that curiosity.”