Gresham House plc (LON:GHE) Chief Executive Officer Tony Dalwood caught up with DirectorsTalk for an exclusive interview to discuss the rationale for the business, investment strategies and asset classes, how the business is growing, creating shareholder value and what they are most excited about
Q1: Tony, if you could start off by explaining to us the rationale for Gresham House Specialist Asset Management business?
A1: Yes, indeed. Really, the big picture is the one in growth and demand for alternative assets, over the 10-15 years we’ve been asset allocation for institutional investors, family office investors and indeed retail investors. Why has there been that growth, a number of reasons but probably the primary one is the view that these types of assets have generated superior returns or superior better longer-term returns but also there’s potential for non-financial benefits, social impact style benefits as well. So, in summary, I would say the primarily purpose is one where alternative assets has generated better investment returns or perceived to and this had to led to quite an increase in allocations from various entities or people or institutions and that’s one of the areas we’re aiming to exploit through that growth.
Q2: What can you tell me about the investment strategies and asset classes that you’ve currently go with Gresham House?
A2: We’ve got a number now under the umbrella of Gresham House, they tend to be niche or differentiated in their characteristics, they include private equity, what we called strategic public equity which is more of your liquid smaller end of the public market where we take large block positions in public market companies. More recently, we have launched, today actually, the fund called the British Strategic Investment Fund which is focussed on UK infrastructure-related assets and housing-related assets and we also own one of the UK’s largest forestry timber asset management businesses, in due course, we’ve indicated we’re looking very hard at renewable energy as a platform to develop as well.
Q3: So, how are you growing the business, is it organically or through acquisitions?
A3: It’s very much both. Organically, we’ve been growing assets under management considerably through distribution channels that we have and we’ve put in place here, we’re also aiming to bring central services under one umbrella so we can create synergies through that aspect. We’ve also been growing the business through acquisitions so we acquired the forestry business, the timber business, about 18/20 months ago and we’ve been growing that organically since then and more recently, we announced the proposal to acquire this renewable energy business, Hazel Capital, which again we hope to develop and have a plan to develop considerably over the medium-term.
Q4: Can you give us a bit more insight into how you’re going to create shareholder value over the longer term?
A4: There’s two parts to the shareholder value equation in our mind, one is the financial aspect and two is the brand aspect.
As far as the financial aspects go, there’s very much a focus on establishing a profitable long-term business, we have a forecast out there now for the business being profitable in 2018 and growing from that point on. Those profits come from growing the assets under management as well as, what we don’t put on our balance sheet but are building over time, the carried interests that we have in some of the funds that we have under management. So, some of the funds are limited partnerships and listed investment trust in their nature and we build performance fees, or carried interest, it would take a long time to come through but they are valuable in their own right. So, the first point if the financial metrics, particularly focusses around profitability.
The second one if the brand aspects as I mentioned. Why is that relevant? It’s relevant because in our mind the value that can be attributed to the profits that Gresham House generates should have a higher value, a price earnings multiple will be higher if people perceive the brand of Gresham House is one that has value.
Q5: What are you most excited about for Gresham House and what keeps you awake at night?
A5: Quite a few exciting things. The people in this business, they’re great people in Gresham House and around Gresham House we’ve got some very experienced and successful businesses as well and a lot of them you can see within our website are mentioned or indicated, it’s actually an extremely good place to come and work. On top of that, the growth that I talked about at the start in terms of alternative asset management, there’s just increasingly more evidence of that and again that therefore reinforces the excitement that I talked about right at the start. I think the other positive thing about it is we do get quite a buzz or excitement out of making money for clients and therefore ultimately the shareholders so that’s something we do focus on, the client aspect if they’re satisfied we know that ultimately our shareholders will be satisfied as well.
So, as far as the other side of the coin, what keeps us awake, well I think the market is a fragile place at the moment, we’ve 9-10 years into quite a bull run and those meta-economic risks are ones that could be combined with valuation concerns in terms of the equity markets and the bond markets. So, I think that cocktail there is something that certainly is at the forefront of my mind. I think as far as other things that consistently go through my mind is how can we make clients even happier, that’s something is always a focus here for everybody involved in the business.