Kedge Capital’s new asset
management subsidiary, Northill Capital, has set its sights on
private banks as potential future clients. Founding director
Jonathan Little tells Maryrose Fison why he decided to swap a job
at a Fortune 500 company for a family office in
Piccadilly.
Go deeper with GlobalData
It is not
every day that the vice chairman of a Fortune 500 company managing
more than $1trn of assets decides to begin a new job running a
start-up with no financial goals.
But that is exactly what Jonathan
Little, the former vice-chairman and interim head of assets at BNY
Mellon, decided to do exactly eight months ago and he has not got
the faintest whiff of nostalgia about him.
After ten years growing Mellon from
a small asset management company to merging with Bank of New York
in 2007 – to becoming interim head of asset management at one of
the world’s largest fund management houses – Little says he had
reached a turning point where something had to change.
“You get to the stage where you
either carry on where you are, keep doing what you are doing after
ten years or you have to change – and to be honest I was looking to
do something a bit more entrepreneurial,” he says.
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By GlobalDataNow Little is heading Northill, a
separate financial entity to Kedge Capital, the family office owned
by Swiss-Italianbnaire businessman Ernesto Bertarelli.
While Kedge Capital invests in
asset managers as a client, Northill aims to buy stakes in and take
over and build a asset manager.
“We wanted a different name for our
activities because the family office is effectively my partner in
the venture and there are some conflicts of interest that you can
get when you are, for example, looking to buy stakes in, take over
and build asset management,” says
Little.
Going forward with 10-30
‘ideas’
He is reluctant to put figures on
his goals but says he does “want to get some interesting deals
done” over the coming year and says he could be looking at anything
between 10 and 30 ideas at the moment.
With an initial investment in the
region of $1bn, Northill Capital has financial resources on its
side, although, Little points out, good opportunities do not
necessarily come cheap.
“If you want to lift out an
interesting fund management team from somewhere they do not need
much equity capital, but they’ll need seed capital, so that can be
£20m ($32m), £30m or £50m. Similarly, if we go and buy an existing
asset manager we could easily spend $100m or $200m on buying a
majority stake in an existing company.”
Together with his other founding
partners, former colleagues from BNY Mellon Rick Potter and Jeremy
Bassil, he plans to grow Northill Capital into a multi-faceted
asset management business.
Three-pronged
approach
There are three main strands to his
strategy with the most immediate revenue opportunity coming in the
form of buying out asset management companies where the owners are
approaching retirement and looking for a succession plan.
“The most fertile business
opportunity is with businesses where there are management
transitions underway who now want to start thinking about
succession planning. They may not be running the firm, it may be a
younger generation running the firm, but they have got to do
something to crystallise that.”
He estimates that at least a dozen
companies would fall into this category in London alone and the
scope for making returns would be large.
“You buy them and on day one these
are profitable businesses. If you buy something with £10bn under
management, it might be making £30 or £40m a year, so you’ve
immediately got a revenue stream.”
The second strand to the business
plan, which is a longer-term goal, is to identify teams of talented
fund managers who are looking to exit the companies they are with
and then attract them to work at Northill Capital.
“We are tracking hundreds of
companies and are aware of who owns them currently, who owns the
equity, where they are, what they are doing, what their plans are
and whether there are opportunities for us.”
The final strand is in lift-outs,
where Northill Capital will buy out the asset management arms of
organisations which are looking to simplify their model.
Private banks: tomorrow’s
clients
Private banks will play a central
role as potential clients, Little says. While he intends to bring
on board a range of clients, including institutional investors, the
diverse clientele of private banks will be an important piece of
the jigsaw.
“Private banks will potentially be
our clients. A lot of them are very smart, particularly the
boutique ones which have a preference for businesses that are
privately owned and they like businesses where management have
equity.
“Increasingly, a lot of the private
banks like to seek out names that their clients can not find on
their own. If you are a private bank and you recommend to your
clients that they buy BlackRock, Fidelity and Wellington, they can
kind of work that out for themselves,” says Little.
“Whereas if you recommend that they
buy this wonderful little £1bn stock that is a really good
investment that they have never heard of then you are adding real
value.”
Finding the right
balance
As with all things in business, it
is about creating the right mix of assets, and Little is keen to
ensure the company’s offering as well as client base is broad.
“There are two things I would like
to have in the end: one is to have a business that is balanced. If
we do five deals we do not want to be with five long-only equity
managers or five commodity hedge fund managers because you’d end up
with a business that was very skewed towards that,” he
says.
“Secondly, on the client-base side
it would be helpful for us to have a number of firms whose client
base was subtly different. One might have a 90% reliance on
institutional pension funds or another might be more reliant on
wealth managers in Asia.”
It may be in its infancy, but with the backing of the Bertarelli
family, Northill Capital looks set to make a splash in the highly
competitive asset management arena. Will more family offices
follow?
