“Launching a boutique is a bit like deciding to have children,” Alex Odd (pictured), CEO and founder of Tyndall Investment Management, tells Portfolio Adviser. “Everyone tells you it’s brilliant, but nobody tells you what it is really like – the gritty reality than comes with the immense happiness. There are moments of intense joy and chronic sleep deprivation, and those moments tend to recycle themselves.
“But you have to really believe in what you’re trying to do. Because otherwise, you just wouldn’t do it.”
The seeds of Tyndall were planted in 2014, after Odd decided to leave M&G after an eight-year period. During that time, he headed up the firm’s Dividend fund which, at its largest point during his tenure, reached £1.4bn in assets. Prior to this, Odd worked as an assistant fund manager at Jupiter Asset Management – a role he landed in 1997 two years after he graduated.
“Back then, people didn’t go to university wanting to be a fund manager – people just ended up becoming fund managers. There were some huge institutions, but it was also quite a decentralised industry in the dark decades back when I started,” he says.
“I was a trainee auditor for a short while, which was a disaster, to the point that when I handed in my resignation, they were cock-a-hoop.
“But then I got offered a job at Jupiter – I think because, as much as anything, I was there and the company was growing quickly. I was lucky enough to work in a very vibrant, stimulating environment there. It was a young firm, full of big names and interesting people.
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“It was run by John [Duffield], who is a big personality in himself. He built a team of very talented fund managers around him – ranging from William Littlewood to Richard Pease. To be a junior member of that cohort and to learn my trade there meant I was given a huge opportunity. It was a fantastic experience to have.”
Odd was then approached by M&G which, at the time, was looking to reinvent itself and make various changes, according to Odd.
“It was more institutional, but it had an ethos of genuine teamwork. It was very performance-focused; it understood that if you wanted to do a good job for clients it was about delivering performance,” he explains.
“M&G performed quite well during the financial crisis but firms became spooked. There was a subtle change in emphasis across the industry. Of all the people I worked with back then, very few are still at M&G but we are still in touch.
“It was a happy family and an exciting time. But the reason I am rambling on about those two experiences is that – these were my experiences of the world of investing. It was about working in vibrant team environments with a focus on delivering for clients.”
After a total of 16 years running money as part of established asset management firms, Odd decided to launch a single-strategy, single-fund venture on his own, with the aim of running a differentiated mandate with a high active share.
“I had no great aspiration for it to be particularly big. It was just an opportunity to run a fund really well, in a way that didn’t need to be diluted by risk or compliance committees. It would only have to focus on one thing, which was delivering for clients.”
But in the process of setting up shop, Odd says he discovered an “industry-wide malaise”, whereby a number of fund managers were keen to break free from large institutions and run differentiated strategies. Therefore, the now-CEO’s vision of a one-man-shop broadened out into Tyndall Investment Management, which officially launched in 2017. Today, it has three funds under management, a private client business, its Partnerships team – which is headed up by James Sullivan and provides investment solutions to advisers – and a team of 40 people in total.
‘It’s grim out there’
Odd says there have been a handful of occasions whereby Tyndall has had to prove its mettle relative to its larger incumbent peers.
The most challenging – but ultimately most rewarding time – for the firm, was how it managed to deal with Covid, in terms of navigating market turbulence and engaging with clients.
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“Because we didn’t have any legacy horrors, we were able to adapt. The logistics of Covid didn’t phase us, nor make any difference to use operationally other than reducing the social element,” Odd explains.
“In fact, it freed everybody up to speak to clients directly. We could phone them up and say, ‘Look, it’s grim out there. Markets are difficult. Try not to worry – focus on the important things and the important people in your life – look after yourself. We’ve got the investment side – we will deal with it.’
“This approach really resonated on the private client side in that we were able to proactively communicate with the market, during a time that the industry had become very inward-looking. They were worried about their own procedures, how to do compliance, that kind of thing.
“We therefore got a lot of referred business on the private client side – perhaps we got more airtime than we deserved, relative to our size.”
On the fund side, Odd says they were dealt a level playing field relative to their larger competitors – quite simply, because even those with large marketing budgets were unable to spend them.
“This was a fantastic leveller because the scale advantage of the larger firms was suddenly diluted. It meant Tyndall was able to have an equal voice in the marketplace. It gave us the confidence that what we were doing mattered.
“When the chips were down, it meant we were able to conduct ourselves in a way that we were proud of. It made us think, ‘we should be doing more of this’. This is when we actively started talking to new joiners.”
He adds: “It is difficult to quantify what the long-term effects of lockdown have been. But sentiment towards our industry is really very low. And what we are trying to do is instil confidence.”
Sentiment
According to Odd, the reason sentiment towards the asset management industry is in the doldrums, is multi-faceted and exists across different tranches of investors.
“There are people who have been around for a long time, who have a slightly more gung-ho approach [to investing],” he says. “Their confidence has been slightly undermined by higher levels of industry oversight and more management intervention in investment processes, which has curtailed the competence of some firms.
“Meanwhile, younger investors have been taught their trade in a peculiar market environment. If you look at market returns post the global financial crisis, there was a prolonged period of time when quality growth outperformed – there was a very high factor bias. People came to believe that is how you run money. People who have been around for longer know that this ebbs and flows.
“Interestingly, there isn’t an answer – that is the joy and charm of it. Therefore, post the run-up that we saw around Covid, in that type of style, the subsequent sharp reversal undermined a lot of people’s confidence. Because they were struggling to comprehend why things weren’t working.”
Taking the rough with the smooth
When it comes to the firm’s three funds – VT Tyndall Global Select, North American and Unconstrained UK Income – each of them are managed based on their managers’ own convictions, without a house view or centralised investment outlook.
Therefore, the managers are able to exercise genuine conviction investing, and individual accountability. But part of this accountability, according to Odd, is believing in the managers’ process and supporting them through both turbulent and strong performance.
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“When you are having a tricky time, it is important that people around you support you and help you through it – in the same way you support colleagues when things are going well,” he says.
“Also, we don’t put time pressure on people. We don’t have arbitrary business development tasks. We don’t look at performance over quarterly cycles, because it just makes no sense.
“One of the ironies I have noticed is that, if you run money for a quoted business, and that business has to report to the stockmarket once per quarter, the business becomes caught in numerous cycles. There is an investor base that is likely thinking in five, 10 or 20-year cycles, because that is a reasonable time horizon to invest for, but the company is allocating capital and investing into the business over a much shorter time frame. This makes no sense at all.”
As such, Odd is a great believer in patience and trusting the management team. He says a prime example of this has been its Unconstrained UK Income fund, managed by Simon Murphy.
Since launch in September 2015, the £27.3m fund has returned 47.5% compared to its average peer in the IA UK Equity Income’s total return of 55.3%, according to data from FE Fundinfo. However, it achieved a top-quartile total return in 2020, having only lost 0.3% compared to its average peer’s loss of 10.7%. It also managed to achieve a top-quartile return in 2023 of 18%, compared to its sector average’s gain of 7%.
“We spend a lot of time stressing to people that it’s not about guessing what will work over the next quarter,” Odd says. “This has particularly been the case with our income fund, where our manager bought a lot of stocks over the last year due to attractive valuations. You don’t know when the uptick will come, but by now, everybody knows everything that is wrong with the UK.
“Reams and reams have been written about it. But it leaves a situation whereby you have to make a decision. If everything is priced for destruction, and as though nobody will ever make money in the UK again, and that we are all going to get stuck in an eternal doom loop – and if people want to believe that – then that’s fine.
“But if you think that anything other than that is going to be the case, then there is a whole sweet shop of opportunities available. Therefore, the challenge is to provide an environment where people feel confident that they can deploy capital into these areas, and to give them time to let valuations rise.”
Hiring managers
When it came to hiring the three fund managers that currently run the mandates under Tyndall’s stable, Odd says the people themselves were chosen above their portfolios.
“For us, having people with the right mindset is absolutely vital. Because without that willingness to put yourself out there, you don’t go anywhere. Tyndall is a small, young firm and the least we can do is bring something fresh and new to the party.
“We’re not going to invent new asset classes or launch bitcoin ETFs – we leave that to other people. But what we can do is invest in established asset classes really well. This means you have to hire the right people.
“Therefore, our primary determinant is finding people who are willing to express their conviction rather than hide behind risk-adjusted return benchmarks, and other such evils.”
Fund selectors
Given the regulatory backdrop, a world of increasing consolidation and an ever-discerning community of fund selectors, however, Odd admits it it no mean feat to find investors who understand what the firm does.
“In terms of portfolio construction, I think this is far more sophisticated now than it ever used to be,” the CEO explains. “This is why being able to provide differentiated products is so valuable. There are now so many areas that have become so homogenised. There used to be a time when people would consider holding three different global equity funds and feel they had genuine diversification. Today, it is incredibly difficult to find three genuinely differentiated global funds.”
He describes the UK equity income sector a the “posterchild” for this, adding: “It is terrifying how homogenous that sector is. There was a point last year when there was just two percentage points separating the top decile and the bottom decile. And they’re charging 100 basis points for what is essentially an index-plus product.
“The industry probably has a right to be grumpy. It’s beholden on the industry to look after these clients – that gets forgotten sometimes.”
A cycle for boutiques
When asked about the potential revival of boutiques, amid a challenging environment for management teams to make it on their own, Odd says it is cyclical as opposed to a structural change.
“I don’t think it is particularly controversial to say that Jupiter succeeded because of the complacency of the large incumbents in the latter part of the late eighties to early nineties,” he reasons. “Then, there are the Artemis’s and Neptunes of this world that came about in the early noughties and benefited from the same theme.
“The Baillie Giffords of this world have done an amazing job of reinventing themselves from quite an institutional house, to a high-alpha, very focused, returns-based investment house. So, it’s an evolving feat. Part of the reason Baillie Gifford has managed to do this is it’s very transparent.”
The CEO says evolution within the industry is “the best part of it, in many ways”. However, this comes with additional pressures and that asset managers are held to account more than they ever have been before (“rightly so, because we are entrusted to look after people’s money”).
“My expectation is that we are going to go through a number of these cyclical changes,” Odd reasons. “If you were to really push me on this, I would have to admit that this evolutionary cycle has taken longer than I would have liked. I think this is a function of what has happened with monetary policy and Covid; it has elongated the previous cycle.
“But I think we are seeing the emergence of a new cycle and an opportunity for boutique fund management to really demonstrate their differences from the broader market. Because ultimately, the reason boutiques do well is because there is an opportunity cost with investors holding money in large, behemoth, institutional fund houses.
“You can make your money work an awful lot harder at a boutique. But the opportunity cost has to be great enough that investors get over the psychological hurdle of: ‘I’m taking personal risk by supporting a smaller firm’.
“Therefore, it is Tyndall’s job to make it as hard as possible for people to stay complacent in large, institutionalised funds.”
Future plans
When asked about the next steps for Tyndall IM, Odd says the key consideration is to find “like-minded folk” and that, while the operational hurdles of launching a new fund are harder than they were before, it is “still doable”.
“If you find people that have the level of conviction and willingness to do something a little bit different, we are open to that opportunity. We are always on the lookout,” he explains.
“I have a horrible equity bias. I don’t understand duration. There is always a temptation to fill up the geographies – but it’s really about finding the right people. It is not a case of just saying: ‘Right, we need to launch an emerging market fund’.
“As an industry we are terrible for waiting for assets to go up a lot and then launching a fund. It is far better to find good people when their asset classes aren’t in favour, and to nurture them through that difficult period.
“What we want is a suite of funds that when the time is right, they’re ready for the market rather than waiting for things to charge and then charging towards the asset class.”
The biggest headwind facing boutiques over the medium-to-long term? Odd says it is a matter of scale.
“People always consider small funds as being inherently riskier than large funds. This makes me a little bit sad. I understand why people think like that, and I sympathise with them. I just don’t agree,” he tells Portfolio Adviser. “I think smaller funds are far more liquid and they tend to be run by very focused individuals who have a high degree of conviction in what they’re doing.
“If you have a choice between a £25m fund that’s absolutely flying and a £10bn fund that’s just travelling sideways, it is a shame when people feel they need to opt for the latter.
“But it is our job to make the case, over and over again, why it is better for investors to support us rather than stick with institutional funds. We have to earn that trust and acceptance.”
