Richmond Asset Management is launching five offshore, Bermuda-domiciled funds aimed at Asian high-net worth and institutional clients, in a bid to transform itself from an investment advisor to a full-fledged boutique fund management house.
The firm made its initial foray into managing its own funds two years ago with the introduction of Funds Optimization Service (FOS), a momentum strategy using dynamic allocations among mutual funds around the world. For the decade prior to that, Richmond had been a financial planner and investment advisor, a role it continues. FOS racked up 110% returns (gross of fees) in those two years. It also found its currency management, operating along similar lines, was effective. "That's just one asset class," says Graham Peacock, sales and marketing manager. "We thought, wouldn't this work for others?"
The firm now has $350 million of funds under advisement and under management. The new five funds aim to significantly grow AUM, although Peacock declined to reveal the target asset number. Richmond's founder, Graham Bibby, is driving the initiative and looking to hire at least one more associate to manage the new portfolios. (Bibby is also diversifying Richmond into property development, mainly in Phuket.)
"We wanted to broaden our investor base and channel distribution," Peacock says. These funds aren't meant for the mass retail market but can now be aimed at institutions as well as mass affluent, with a minimum investment reduced from $100,000 to $50,000. These funds are not authorized by the Hong Kong authorities.
Fund Optimizer, one of Richmond's five new products, is a more efficient version of FOS, trading in and out of mutual funds but with faster dealing times, more automation and third-party auditing, all of which brings the costs down to a level acceptable to institutional investors. Because of liquidity concerns when trading among rather small mutual funds, Richmond will cap investments at an undisclosed level.
Currency Optimizer is a more mature version of Richmond's current cash management service, with a broader selection of currencies and including the use of futures and structured products to control risk.
Equity Optimizer will begin as momentum plays against indices. Once the firm gets its feet, this product will also extend into using futures to invest by sector or individual stocks. "It's Fund Optimizer grown up," Peacock says, noting there is no need to cap investments into this product.
Hedge Optimizer has been in existence as a long/short equity strategy that the firm hasn't promoted, but will now expand to any hedge fund strategy. Richmond tracks 800-900 open hedge funds using a Reuters system called Hindsight. "It's not as dynamic as Fund Optimizer but we can still switch," Peacock says. "We plan to add a range of risk/return portfolios."
Last, Venture & Tech Optimizer will invest in structured products and IPOs of tech companies, and is meant to be a longer-term play.
Equity Optimizer and Venture & Tech Optimizer will launch 120-day offering periods starting as soon as March 31 (the exact date isn't decided) while Richmond will transfer existing assets into the other three funds.
The firm will charge 1-5% entry fee which will be shared with distributors, an annual management fee of 1.5% and a performance fee of 20%, although the performance fee can only be triggered once a threshold of 3-12% return is achieved, depending on the asset class. Dexia is the sub-custodian and administrator. Richmond in Hong Kong is acting as the funds' investment advisor although the funds are operated by Richmond BVI.