Gavin Rochussen is a builder.
In college, he built a 32-foot yacht with his brother because he wanted to race it across the Atlantic. Ever since, he's been building businesses.
Born in southern Rhodesia (now Zimbabwe), he grew up in South Africa, the son of a sailing enthusiast. Trained as a chartered accountant, Mr. Rochussen's first experience in money management was growing assets under management at the single-family wealth manager Fleming Family & Partners to €8 billion ($14.5 billion) from about €1.1 billion in five years. “I loved it, absolutely loved it,” he said. “That's what I do.”
Mr. Rochussen became CEO of J O Hambro Capital Management Ltd. in London in November 2008, shortly after the global financial crisis came into full swing. Undaunted, he bought a 5% stake in the firm and has built JOHCM into a diversified equity boutique with €6.7 billion in assets, up from €1.5 billion three years prior.
Hit hard by the crisis, JOHCM needed to diversify and grow. But because each of the firm's equity strategies is capacity constrained, the only way to grow is by adding teams, something he expects to do about once a year for the next few years. Once a Europe-focused house with mostly European clients, JOHCM now boasts global, emerging markets and Asia ex-Japan equity strategies. The U.S. is his next target market.
In October, Mr. Rochussen wrapped up a sale of JOHCM to Sydney, Australia-based BT Investment Management Ltd. for €209 million. JOHCM operates as a stand-alone boutique within BTIM.
A daily jogger who's run 33 marathons, Mr. Rochussen attributes his success to an entrepreneurial, “can-do attitude”: Where others might find obstacles and excuses, “I tend to look at things as, "Look, that's where we want to get to, let's find a way of getting there.'”
How did you put your can-do attitude to work at JOHCM? I arrived as Lehman was going bust, so I saw that as an opportunity. I was going to take a year off to go sailing because my big ambition has always been to do the trans-Atlantic crossing at some point.
But I got a phone call from Jamie Hambro, our chairman here (at JOHCM), who said "We're having a really tough time' (getting through the global financial crisis).
It was a triple whammy — we had outflows, we had performance on our back foot and we had market levels coming off. So Jamie had said we need somebody to come in and reinvigorate; it's a great business model. I knew the business very, very well — they were one of the managers for Fleming.
When I arrived here in '08, this business was 10% institutional clients and 90% retail (with assets of) about €1.5 billion across eight different (equity) strategies. (We were) highly concentrated to U.K. and European investors, and most of the equities we managed — I would say 80% — were U.K. and European equities. So, very reliant on equity performance in the U.K. and Europe, and also very reliant on the behavior and demand from European investors. So it's no wonder we had a problem in the crisis.
So how did you turn things around? I cut the overhead, took all of the fat out of the business, focused the business, analyzed the client base, understood what had hurt the business so much, and it was clearly a concentration in client segments that were too volatile. What I had to do to rebuild the business was to expand and diversify into client segments which were less volatile — longer-term investors that really understood what we did who wouldn't have to redeem in short-term periods of higher volatility.
That's what led you to building the institutional business? That's exactly why. (We pitched ourselves as) an active equity manager that adds value (and whose) interests are aligned with clients because of our compensation structure. We charge performance fees (15%) on our long-only funds on relative outperformance. We share that performance fee with the (portfolio) manager, so it's very transparent. The teams themselves receive exactly half of the performance fees we receive from our clients. The teams also share in the revenue they generate from their particular fund, and they convert that revenue over time to equity in the firm. They've got a very clear path in terms of how they create value for themselves.
So I've been able to recruit top managers over the last 3-1/2 years who've been disillusioned at other places where the structures aren't as transparent.
The next step is to build your U.S. business? Yes. Last year we raised net new (institutional) money of €1.12 billion, and 60% of that was U.S. And we don't have a presence there, all the client servicing is done from here. So I'm very much looking to increase our focus on the U.S.; this could be a presence, it could be a new U.S. team.
You are actively looking for a U.S. investment team? Yes, we're looking to fill two gaps: We're looking for a U.S. equity manager, mid- to large-cap, growth. And we're looking for global or international (ex-U.S.) value, and preferably run from the U.S. There are some great boutiques on the East Coast doing these strategies. So I'm doing a lot of snooping around at the moment to see what we can do.
You've said that performance is key to your business. As a manager, how do you make sure that's in place? It comes down to people, people, people. We only recruit teams that have long-term track records. We're not an incubator. We recruit and provide management oversight for established managers who've made a name for themselves, got a bit of a profile and are looking for investment autonomy. We give them that.
Selection of the right teams is the starting point; then you've got to give them the right environment to operate in. They all report directly to me. And our investment director provides the oversight — portfolio risk, performance attribution, centralized dealing. And we provide sales and marketing. We limit (managers') marketing time to 10% of their total time because we don't want them to be distracted. We want them to focus on their portfolio. Institutional clients and consultants love that. We don't want to give our managers any excuse for underperformance.
How has the buyout from BT affected the day-to-day business and culture here? It hasn't. When I bought in here I knew I had to draw in additional shareholding. As I built the business, I went out there looking for the most appropriate long-term shareholder — folk who would understand what our culture and ethos was, would understand what this business represented, would understand what our long-term strategy was. All of those institutions that would have changed our culture had they been the acquirer, I just disregarded.
Is your big ambition still to do a trans-Atlantic sailing trip? One day I'm going to do the Atlantic crossing, a thing called the ARC (Atlantic Rally for Cruisers), which is an easy one. Then, depending on what I'm doing at the time, I might live in the Caribbean for a couple of years, and then carry on (around the world).
