+20% = The annual return this super investor gets for his clients
Alan Miller is revolutionising the way private wealth is managed.
Let’s get minted: but you’ll need £250,000 to get started with Alan Miller
He knows a lot about funds. In fact, he knows a lot about money. Alan Miller has one of the longest track records in money-managment in the UK, having spent over 19 years overseeing a variety of assets and investment vehicles. He was a director at Jupiter Asset Management and, more recently, Chief Investment Officer and founding shareholder of New Star Asset Management, until his departure in early 2007. It is unsurprising, then, that Mr Miller is back investing money for private clients - and achieving better returns than his peers. He established Spencer-Churchill Miller Private (SCM Private), together with Alexander Spencer-Churchill, the scion of the Churchill family, in June 2009.
The aim was to give investors a better deal for their money than the high fees and underwhelming performance that Mr Miller says is all too common among active managers. He has opted for two investment portfolios using exchange-traded funds (ETFs): a long-term portfolio, akin to an old-fashioned pension fund, typically investing in equities, bonds and cash; and an absolute return portfolio. The funds, he says, are simple, diversified, low-cost, transparent and liquid.
And so far, so good for Mr Miller. Since SCM Private started, in early June 2009 to the end of July 2010 their Long-Term portfolio has risen by 20.8 per cent and their Absolute Return portfolio has risen by 18.1 per cent, both substantially better than their peers. Their Absolute Return portfolio has produced more than three times the average 5.5 per cent gain of IMA Absolute Return Funds (Investment Management Association) over exactly the same period. "This is amazing, really." SCM Private is on target to manage about £100m by the end of the year.
By his own admission, Mr Miller admits SCM Private has exceeded expectations for its maiden year. "We are not buying a small selection of individual stocks or bonds, so you would have thought a more concentrated portfolio would achieve higher performance for the higher fees but we have achieved a higher performance on a much wider spread and a lower fee."
We are offering people something that isn’t available via the big names
So, what does he invest in? "UK and US equities, European equities, Chinese equities, several emerging markets. In bonds; UK bonds, US bonds, emerging market bonds; UK index links, commodities, properties and cash. It's a wide range of things.
"Research shows that 90 per cent of your return is determined by which asset you invest in and yet virtually all fund managers spend 90 per cent of their time choosing one stock against another. We concentrate on the assets."
SCM Private takes a 0.75 per cent management fee and up to 5 per cent performance fee. The minimum investment per client is £250,000, and all investments are held in clients' own names. Mr Miller has invested "a lot of family money" into the fund. He has not yet drawn a salary.
His primary concern is actively managing money in a low-cost, efficient way. The former New Star man believes private clients are getting a raw deal from conventional funds. The greatest extra charges, he says, are the dealing fees incurred by funds when managers decide to sell or buy holdings.
"People need to understand the real costs, and not just the headline costs. If you invest £10,000 and nothing changes in the underlying stocks or bonds, how much would they expect to receive back? How much is coming out in hidden charges?
"What we tried to do from the very start was to change the way people have their money managed - to make everything completely transparent, have a wide spread of assets in the name of the client with no hidden costs and where the fund manager has exactly the same portfolio as the client. We are offering people something that we think is not available via the big names. We believe we are the only people who have the low-cost fees and invest in wide spread of assets and via the low-cost way (exchange-traded funds)."
And Mr Miller is confident about SCM Private's future.
The funds, he points out, have been stress-tested. "When we started, the markets fell five to ten per cent, so in a way, it's good that the portfolios have been stress-tested, and both our portfolios came through it very well."
In fact, the private wealth management industry, in general, did not suffer during the recession.
He points out: "If you look at profit margins of the fund management industry, if anything it's been pretty good. A lot of clients don't realise how, in fund management, you can earn a much higher return by paying a much lower fee. Profit margins are still very high, and the huge savings that fund managers can make has not been passed on to clients."
A former pupil at Haberdashers' Aske's school, Herts, Mr Miller left New Star in 2007. His decision to do so followed a bitter public divorce from his wife of two years, as reported in the JC in May 2006. Despite an appeal to the High Court and House of Lords, Mr Miller, earning up to £3 m a year at the time, was ordered to make a £5m settlement to his ex-wife - £4,935.83 for every day of their childless, 31-month marriage. During the appeal process, Mr Miller's lawyer famously claimed it would have been cheaper if his client had run her over in a car.
Mr Miller grew up in Hampstead, and now lives by Sloane Square. A father-of-three, Mr Miller has since remarried and lives with his wife Gina.