High-profile frauds and poor returns have tarnished the private fund management industry. Super investor Alan Miller aims to change that.
To many, Alan Miller is one of Britain’s most accomplished fund mangers, having made more than £30 million as chief of New Star’s flagship hedge fund.
Others may know him for his high-profile divorce and the £5 million he was ordered to pay his wife of nearly three years. But it is the money man’s latest venture that he really wants to be remembered for.
Mr Miller, 45, has launched a business which he hopes will revolutionise the private-client wealth management industry. The new enterprise, Spencer-Churchill Miller Private, has been established together with Alexander Spencer-Churchill, the scion of the Churchill family. It aims to bring trust back to the market place, giving 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.
“I have always felt that private clients get the raw end of the deal,” says Mr Miller, who has 19 years experience as a senior fund manager. “They tend to be the most loyal clients but get the poorest service for the highest fee. We want to go back to old-fashioned principles of trust, integrity and building up a business that our future inheritors can be proud of.”
He says the combination of high-profile hedge fund frauds, such as Bernard Madoff, and poor performance from fund managers, have tarnished the industry and its reputation, making it a risky business. “I wanted to provide a more secure way of investing.”
Mr Miller started taking client money for investment last week. He has opted for two investment strategies using exchange traded funds (ETFs). By doing so he says the funds will be simple, diversified, low-cost, transparent and liquid.
The minimum investment per client is £1 million, and all investments will be held in clients’ own names. The first portfolio will be managed in the same way as a pension fund, with a broad diversification of asset classes. It will have a long-term bias towards equities. Its benchmark will be 70 per cent equities, 22.5 per cent bonds and 7.5 per cent cash. The second offering is an absolute return strategy and will be managed on a more aggressive basis .
He explains: “There is an annual management fee of 0.75 per cent. The manager is incentivised to do well. If he doesn’t, he doesn’t receive much of a fee. And there will be no restrictions on clients wanting to access their money.
“I have never been in the position to set the rules before. Therefore, the ability to come up with something that I think is pretty radical is something I am very excited about.”
So convinced by its potential, Mr Miller plans to invest part of his fortune in the fund. He will not draw a salary but will be entitled to a 5 per cent performance fee. “We can’t earn a penny until the company makes money and the only way to do this is to do well for our clients.” But, it’s not as if he needs the money. By his own admission he has pretty much been retired since leaving the industry two years ago, and “got fitter and been managing his own finances”.
Mr Miller left New Star Asset Management in early 2007, having made more than £30 million. He had previously worked for Hermes Investment Management, Gartmore and Jupiter Asset Management before joining New Star in 2001.
His decision to leave followed a bitter public divorce from his wife of two years as reported exclusively in the JC in 2006. Despite an appeal to the High Court and House of Lords, Mr Miller, earning up to £3 million a year at the time, was ordered to make a £5 million settlement to his ex-wife — £4,935.83 for every day of their childless 31-month marriage. Does he believe wealthy businessmen get a raw deal?
“I felt the decision in my case was wholly unfair. If I didn’t fight it then it would happen to others. I have put it all behind me. The most important thing in my life is my family — more so than any sum of money.” Mr Miller has since remarried and lives with his wife, Gina, and their two children, one of whom he has adopted. He is now keen to get back to business and “do something his kids can be proud of”.
Is it not a risky time to launch? “It is probably the best time ever because we can do fantastic deals. We don’t have high overheads or high salaries. We pass that on to our client. And we can probably afford to do things others can’t. The first client is me and I am hoping others will follow.” The duo plan to launch a property service later in the year, which will be run by Mr Spencer-Churchill. Mr Miller will continue to run the wealth management side.