Kevin Doran, formerly CIO of Brown Shipley, has partnered with Shahid Chaudhri of Host Capital to launch a discretionary investment management business that aims to shake up the industry by offering "active performance at a passive price".
Doran left his role at Brown Shipley in March 2016 to become group head of research at parent firm KBL European Private Bankers, but quit just three months later to take a sabbatical.
Meanwhile, Chaudhri, who has a 30-year career in investment and risk management under his belt, has been at ACD Host Capital for three years.
Chaudhri will become CIO at the new business, while Doran will take on the role of chief executive. The venture will be called Alphabet Investment Partners, subject to regulatory approvals, while Host Capital will be the parent company.
In addition, Matt Brennan, head of fixed income at Brown Shipley, will join the duo on 1 November as senior fund manager, while Host Capital's Asim Javed will move over with Chaudhri as quant fund manager.
John Reynolds, formerly CIO at Capita and head of research at RBS and ABN Amro, has joined the board as non-executive chairman, while George Higginson, former CEO at Sesame Bankhall, is non-executive director.
The business seeks to provide outcome-oriented investment solutions by focusing on risk first and trying to maximise returns within the given volatility bracket.
It will do so by partnering with financial advice businesses to offer discretionary investment management solutions using Host Capital's proprietary quant risk management systems.
These will seek to redefine asset classes by putting those that are almost perfectly correlated to one another (such as UK and European equities) into one category, which Doran said would effectively allow the team to deliver better returns for a given level of risk.
The asset allocation will be tailored to the individual needs of the IFAs based on the risk profiles of their clients, and will be available for 15bps as a model allocation, or 20bps with the addition of a tactical overlay.
The strategy will predominantly use passive instruments where available, but will use Host's technology to perform a factor analysis on the portfolios to ensure the allocation continues to meet the specific risk needs.
This will cost an additional 15bps, while in larger portfolios the team will have the option to unbundle ETFs to invest in underlying securities, potentially keeping the costs even lower.
The adviser will also have the option to use Host Capital's platform, Digital Wealth Solutions, if they so choose, though the business will be "platform agnostic".
The platform will cost an additional 15bps, making the whole proposition a maximum of 50bps. Advisers can then offer their services to clients, including this DFM solution, for as little as 100bps.
"We want to offer institutional quality investment management for the retail market at a price you cannot get anywhere else in this market," said Doran.
The business will target IFAs with around £50m-£250m in assets and aims to differentiate itself by placing strong emphasis on client service.
As a result, the team will cap the number of advisers it partners with to 26, with the aim to manage £2bn in assets in three years' time.
It will also expand the team as the assets grow, aiming to hire an additional customer service agent for every £120m of AUM it takes on.
The business is set to officially launch on 18 September and will have offices in London and Manchester.
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