No pressure
Ralph is watching what is happening to other funds in the sector with interest. He says: “A strength of our model is that because our funds are only distributed through SJP advisers, we don’t get the pressure some other advisers do.
“There is a difference from 2007-09 in that there is not the same leverage there was then. We are not seeing bank credit lines being curtailed and there is not an environment where investment bank balance sheets are being rapidly unwound. Also, we are not seeing global dislocation at this stage.”
Despite widespread fears over the health of the UK economy, from an investment perspective Ralph believes genuine stockpickers should prevail.
He elaborates: “I do think there is now a good stockpickers’ market. One of our managers memorably described volatility as ‘the friend of the active investor’ because it gives them good opportunities to find stocks that have been mispriced in the market and take advantage of them.
“Over the medium to long term this is exactly the kind of market where our managers who are high-conviction and very long term should do very well.
“We have a preference for managers who express their views in a way that is very different from the underlying benchmark index and who don’t raise the cost of running the fund by over trading.”
Costing up
Cost, of course, is another huge issue the industry is addressing. Ralph claims SJP’s whole process is designed around determining whether managers have the ability, and the set-up, to deliver added value going forward. At the same time, they must recognise that every basis point of cost detracts from the performance.
He says: “If you look across our fund range the average fee is about 34bps, and to get an ETF of the S&P 500 via a platform you are quite often paying between 30-35bps. We are giving clients the ability to access what we believe is a collection of managers who add value over the longer term for the same price as a mainstream ETF.
“Clients want to understand what the cost of advice is, and the good news is that we have always been very transparent about this. There is a flat fee for the cost of the advice they get when they access the platform and the investment committee, plus an underlying annual management fee, which is 1.5%.”
In the post-EU referendum environment, Ralph is insistent that it is too early to form a concrete view on the direction of markets and the economy, and therefore what might be the best way forward for clients.
He says: “As ever, there are two sides to the argument. On the one hand, people are saying the Bank of England should have cut interest rates to stimulate the economy. Others say if the bank hasn’t cut rates, it must be seeing slightly less worrying signs of economy slowdown than some of the doom-mongers have been predicting.”
“I can’t remember seeing such diverse opinions on future expectations. Some people are saying this could be a golden age we are moving into, while others are forecasting a deep and prolonged recession.”
Recession or not, SJP remains confident of looking after clients – the firm saw inflows during the 2007-09 period. While investments may rise and fall, Spencer House is evidence of how hard one must work on the upkeep of presserving wealth if it is to be maintained for the long haul.
Biography
Chris Ralph started his career at St James’s Place in 2009. He joined Cazenove & Co in 1984, specialising in convertible bonds, and subsequently worked with SG Warburg and NatWest Markets. He joined Fidelity to undertake peer group fund manager analysis, which led to him building a specialist team responsible for the manager selection process. Prior to SJP, he was at Maia Capital before Ignis ended the joint-venture.
