Superwoman speaks

Nicola Horlick has worked in the fund management industry for over two decades and has participated in the growth of some of the UK’s premier asset management businesses, including Mercury Asset Management (now BlackRock), Morgan Grenfell Asset Management (now Aberdeen Asset Management) and helped establish Société Generale Asset Management (UK) as their CEO. She is now holding the reins as CEO of her own company Bramden Asset Management and has recently launched a hybrid, hedge and private equity fund of funds.

Horlick has certainly never shied away from the limelight or the gossip columns for that matter. In 1997 she was head of Morgan Grenfell Asset Management when they were acquired by Deutsche Bank. She was suspended by her Frankfurt-based bosses out of fear that she would defect with her London team to a rival. Horlick flew to Germany with a clutch of journalists in tow to demand her job back. She failed. But became the business pages media darling when they realized that she was a mother of five and dubbed her “Superwoman” or “Supermum”. But if you live by the pen you also die by the pen and Horlick has suffered at the hands of journalists who turned her 2004 backtrack on moving to Australia to head AMP and the subsequent dissolution of her 19-year marriage into fodder for the gossip pages.

EVCJ met her for a one-to-one chat at her Knightsbridge offices of Bramden Asset Management, literally across the street from Harrods – where else? The office is modern, with pale green and pink décor and a fish tank. The pink wall was chosen by Horlick herself and is meant to be FT pink – promoting the ‘girl about the City’ image right down to the paint chips.

EVCJ: Your fund is investing in Terra Firma III, Goldman Sachs Capital Partners, Thomas H. Lee VI and Silver Lake III. Does your fame in the UK help you get access to these name brand funds?

Horlick: Well we have had no problems so far getting in the door. So yes this is a factor.

The quality of this portfolio is really, really high. The whole idea is to give people exposure to the top names – the famous name funds for private equity and hedge funds. The same is true in the hedge fund portfolio – we are working with RMF, which is part of Man Group. We can’t name the hedge funds because we haven’t invested in them yet. You see we are not allowed to make promises that we may not be able to fulfil. So you’ll have to guess what these hedge funds are but I can assure you that these are all top flight hedge funds with very strong track records.

EVCJ: So you are investing in two Secondaries funds, Coller International V and Greenpark III as well. Why is that?

Horlick: Well it is just that we need them at the outset to get the diversification. So I think the best analogy is that if you’re setting up a cellar of wine you wouldn’t only buy 2007 vintage because it might be a lousy vintage. So the idea would be that you would probably go and buy some previous years and probably keep some money aside to buy some future years and build your cellar that way and it’s the same in private equity; you get some years doing better than others because it is dependant on what’s going on in the market and the economies of the world and some years turn out to be better years. So we need to make sure we’ve got vintage year diversification so secondary funds will be a feature of the fund at the outset, but once the fund starts rolling forward we won’t need them any more. So they will drop out later.

EVCJ: Is that how you were able to get access to some of your ‘Class A’ managers through secondaries?

Horlick: No we got that separately but one thing that is going to happen is that we have co-investment rights with one of those managers and also we have a reciprocal arrangement that we’ve found a secondary position that is too big for us so we are working with one of those secondaries funds to buy that position. We will work two ways – we will share things with them and they’ll share things with us.

EVCJ: Why have you chosen a hybrid private equity, hedge fund, speciality investment approach for your new Bramden Alternatives Limited?

Horlick: There is a very good reason for having hedge funds and private equity in the same vehicle because the problem, as you know, with private equity is that it has drawdowns. So if you put that into a closed ended vehicle you get what has now become known as the KKR problem. And as you know KKR has had a dreadful record since last year. The problem is that they didn’t think terribly hard about what to do with the cash and as a result there is a drag that has occurred on the performance. If you look at the top quartile returns in the private equity universe over the last 20 years they have been very, very high 23%. If I was to put all the cash on deposit whilst I was waiting for those drawdowns to occur and the current UK deposit rate is about 5.5% that would be a big drag on the performance when what we are aiming for is top quartile type returns. So therefore we have to think about what to do with that money whilst we’re waiting and interestingly the correlation between private equity returns and those of long/short hedge funds is similar, so that is what we’ll be investing in. But definitely not an asset class like managed futures, which is uncorrelated with private equity. It is going to be very difficult to replicate the top quartile returns that you get from private equity of 23% and even harder to replicate the really top performing funds which are achieving 40% to 50% returns. But if you can get close, closer than 5% – it is worth doing.

EVCJ: Other groups doing hybrid funds in UK have a core of in-house funds to wrap the hybrid around – if you will – you don’t. Why is that?

Horlick: We are the only group who are doing the hybrid blend strictly using external funds. There are some groups that have tried to do this using a mix of internal and external funds and that, as far as I’m concerned, isn’t pure enough. I want to have something that’s pure in terms of scope for the best that the industry has to offer. And that is what this fund is.

EVCJ: Obviously there is a liquidity argument for this strategy as well.

Horlick: Yes liquidity is the other major point. Actually there are two major points – firstly you are getting one vehicle that is well diversified and as uncorrelated as we can make it with traditional asset classes. And the second argument is that you’ve got liquidity. And the third argument is that you’ve got access in the first place to some funds, which are very difficult to get into. If you wanted to get into Terra Firma III or Thomas H. Lee’s latest fund, both of which we have in this particular vehicle, then you need to have US$10m to US$20m to get a seat at the table and most people don’t have US$10m to US$20m to get that seat. The way that I’m looking at this is almost like a buying cooperative – lots of people are putting their money in and that is giving them the ability to get that seat at the table. So it is like a buying cooperative and it is a way of democratising an area that has been only for the mega rich, the foundations, the university funds.

EVCJ: Are you going to do any direct investing?

Horlick: We do have co-investment rights with some of the funds as well. So there will be some co-investment. We won’t accept co-investment rights where we are forced to invest in every deal that is shown to us. We wouldn’t want to do that – we want to pick which opportunities we go into.

EVCJ: You’ve already made your private equity investments but have just launched. Where did the cash come from?

Horlick: We set up the fund in Guernsey last year. We put in a bank line from the Bank of Scotland of £100m and we’ve been making commitments through the course of the year. In the case of our hedge fund portfolio, we have funds reserved for us just in case there are changes to the portfolio, but basically that is what we are intending to have and again it is a similar quality portfolio to the private equity investments.

EVCJ: What is the total size of the fund expected to be?

Horlick: We are aiming to raise US$500m. But were also looking to have further issues in years to come so we are looking to build it up to, we hope, a portfolio that will have nearer to US$2bn over a three to four year period.

EVCJ: How confident are you that you’re going to get there?

Horlick: Well it seems to be going very well at the moment. We have two anchor investors in the UK who are putting in a sizable amount of money.

EVCJ: Who are they?

Horlick: I can’t tell you who they are but they are pension funds and we’ve got a third overseas pension fund that is interested as well. We only spoke to a handful of pension funds and they all seem obviously keen on it.

EVCJ: What do you mean by a “sizable amount of money”?

Horlick: We’ve got indicative orders, already, of US$150m and we’re trying to raise US$500m. The book build has only started today so that is pretty good – most people don’t give you their orders until literally 72 hours before it closes. So to have indicative orders of US$150m is really good. So it’s very exciting.

EVCJ: Are you also running managed accounts?

Horlick: Yes. We have a local authority client where we are building them their own bespoke fund. And they have committed a sizable sum, 10% of their entire fund to this. And we are building a private equity portfolio primarily but also with some hedge funds in there.

EVCJ: Is this managed account business model one that Bramden will continue?

Horlick: Yes, we are keen to build up a range of bespoke portfolio clients. There is a limit to how much money you can manage in this area because Thomas H. Lee or Terra Firma are only going to take in a certain amount as an order from one individual client but we can build this business towards a reasonable size. We can certainly have US$10m of alternatives business before we need to worry about size.

EVCJ: Bramden was launched in 2005 and at the time there were lots of rumours that you would be investing in hedge funds and private equity so why has it taken so long to get the Alternatives Fund launched?

Horlick: Well it takes a long time to plan something like this it has taken us 15 months of hard labour working on this fund. It is an incredibly complicated thing to do. We first had to decide how we were going to do it. Then we had to persuade people to let us into their funds. Then we had to go through an IPO process. Then we had to persuade the UK listing authority to allow us to have a full listing on the stock exchange. We had to deal with the Bank of Scotland to provide a bankline into the fund. So it is a very onerous task setting up something like this. It is not something you can do overnight. We had to talk to Man about how we can get into the hedge funds. So we have lived and breathed this fund for 15 months. Some of my colleagues have not left work before midnight for weeks and weeks. Now that the prospectus has been published – they have been able to go home this evening. I, of course, am still here. But I’m the chief executive so that’s how life is. And I was in here on Saturday and Sunday. We’re dealing with investors in the Middle East and the Far East on different time zones. So we can’t necessarily go home and forget about them.

EVCJ: You are one of a handful of powerful women not only in the asset management industry but also in the City. Why are there so few successful women in finance?

Horlick: I wish there were more wore women in the City but there never will be. The women that I’ve employed, at least, don’t like the City. I’ve always tried when I was in big firms and running big firms to recruit equal numbers of male and female graduates. And the girls have tended to leave and go off into PR, journalism and into marketing and this, that and the other. The last thing that they seem to want to do is sit in fund management firms. Now why that is – I don’t know. I don’t really understand why that is. The environment is full of pressure. The hours can be very long. Fortunately not so long in fund management as they are in other bits of the industry. But it is not perceived as being a very female-friendly environment. And that is not going to change. That is what banking is – not female-friendly in my view, especially not if you’re going to have babies. So yes, it is never going to be 50/50 but the most important thing is that women have choice, so that if they want to work in financial services they can. If they do a good job they will be promoted.

EVCJ: You seem to have high female representation in your firm. Do you use positive discrimination?

Horlick: We seem to have a high female content in our firm and that is not through choice. You know I’m not having positive discrimination. It may be due to the fact that we are fairly small and support people tend to be female. In the more senior roles companies tend to have men.

EVCJ: But you do run a female wealth management business Bramdiva. How did that start and what’s next for that bit of your business?

Horlick: In London there were lots of high profile divorce cases where women were walking away with very large settlements and not knowing what to do with it or how to invest it. And we felt that it is a very traumatic time for people when they are going through a divorce and we felt that it would be good if there were someone to do a bit of hand-holding on the financial side of things. So we spoke to a number of divorce lawyers and they said that this was a very good idea. So we launched in November 2005 and it’s been very successful. We have a large number of clients and we’re looking at expanding that to the Middle East where we believe there is real opportunity, particularly in Saudi Arabia where currently there are lots of wealthy women and no female advisors for them to speak to and they can’t for cultural reasons speak to male advisors. So there is a real opportunity for Bramdiva in Saudi Arabia, and in the Gulf States generally, so we are looking to expand Bramdiva to the Middle East next year.