Shaun Harris
The asset management industry’s newest kid on the block, Velocity Asset Management, had a difficult birth.
It was launched at the beginning of last August into a tumultuous market, and also had to cope with the hangover of the Old Mutual Asset Managers’ (Omam) court action enforcing restraint of trade agreements against some key members of the new company, who were part of an Omam walkout team in 1998.
“It took a long time to get our licences, the Financial Services Board (FSB) closely scrutinised Velocity, perhaps because of the earlier court hearing,” says chief strategist Raphe Herrmannsen.
“However, we view the granting of our licences as positive, despite the delay. It was like getting a clean bill of health from the FSB.”
Since inception, Velocity’s five unit trust funds have performed well. The Gilt and Financial Services funds have led their sectors, and the Managed Prudential Fund is in the top quartile. The Emerging Growth Fund is in the second quartile over the same period, and the Growth Fund in the third.
Herrmannsen acknowledges that over the last unit trust quarter to end-December performance has not been that good, but is critical of what he calls the industry’s fixation on short-term results. “Focusing on each quarter’s performance is detrimental to clients. It’s chasing performance after the fact,” he says.
Total funds under management are now at about R700-million, and Herrmannsen says he will be disappointed if this figure does not reach more than R1-billion in a month’s time.
“We’re looking for R4-billion by the middle of next year,” he says.
Part of the problem with launching an asset management company is that there is no track record to show potential investors.
“We’re building up that record now. The other thing you need is for investors to have confidence in you, and that has been the basis for investors placing money with us,” Herrmannsen says. “We have a respected and experienced team.”
Velocity is getting strong support from the linked product houses, with about 80% of inflows into its unit trust funds coming from this source. It is also actively running funds for institutions following a multi-management approach.
The company is often described as an asset management boutique, a label that may limit its aspirations in the industry.
“With a team of 22 people we have deliberately kept ourselves small. We offer a full spectrum of active portfolio management and intend to compete against the major players in the big league,” Herrmannsen says.
Over the past quarter Velocity’s five unit trust funds attracted just over 5% of the non-money market funds that flowed into the unit trust industry, not bad for a company that’s not yet six months old.