Smith Capital Investors has taken in $500m over the past six months

 

James Connington August 27, 2020, 11:42 pm

 

Smith Capital Investors, the income-focused boutique founded by former Janus fixed income CIO, Gibson Smith, is eyeing opportunities in SMAs and new credit strategies as it closes in on the three-year mark.

Currently, the company manages close to $1.5bn split between the two mutual funds that it launched in 2018 in partnership with SS&C’s ALPS. Both have had a stellar 2020 so far. The $1.3bn ALPS/Smith Total Return Bond Fund (SMTHX) is up 7.4% year-to-date, 172 basis points ahead of its category average and 105bps ahead of its benchmark index, per Morningstar Direct. The $143m ALPS/Smith Short Duration Bond Fund (SMASX) has gained 5.2% year-to-date, beating its category average by 266bps and index by 217bps, after a mid-pack return in 2019.

Now, the company is considering an SMA offering and the potential to bring its credit expertise to bear in new strategies, Smith told Fund Intelligence. He set up the firm in early 2018 after 15 years at Janus, where he ended as fixed income CIO. Smith started his career at Morgan Stanley, working in institutional fixed income sales. “We haven’t officially launched our SMA business, except to say that we have a firm minimum at $250m, which is a relatively high minimum,” he said. “I think as we cross our three-year number on the funds in terms of performance, we will start engaging in more conversations around separate accounts.” He added that the company wants to ensure it is well aligned with clients on the expectations of any SMA offering, and doesn’t want “to take on a myriad of small separate accounts and not be able to deliver for the client.”

When Smith set up the firm, the initial focus was on the wealth channel, including wirehouse and independent advisers, tapping its ALPS relationship for access to platforms. The majority of the company’s growth to-date has come from working with individual advisers, to help them understand fixed income markets, plus relationships with family offices and some high-net-worth individuals. This year has proven a success asset gathering wise, as the firm’s income specialism overlapped with a zero interest rate world where investors are hungry for yield. Over the past six months, the firm has taken in $500m in assets. Any new strategies and products that the firm launches from here, are likely to sit in the company’s credit wheelhouse.

The investment team he has built, all of whom have the title “investor,” comprises former colleagues from Janus, plus hires from JPMorgan Asset Management, Cantor Fitzgerald and Morgan Stanley. In addition to investment hires, he also brought across Michael Schrerer as head of adviser distribution, who joined from Janus Henderson, where he was a field sales director. “Clearly there is much more focus on preservation of capital right now … But when I look across the spectrum of where we may be able to provide income and other strategies that help investors, I think there are quite a few [opportunities] on the horizon,” Smith said.

“With my history and my team’s history in the credit markets, both investment grade and high yield, you should anticipate future strategies will be focused in the credit markets.”

He added that he is “a bit of a credit geek at heart,” and that he and his team have historically done well at “understanding the relationship between credit and equity.” Smith said that two of the lessons he learned from his time at Janus and Morgan Stanley were the importance of culture, and to always be on the lookout for talent. “When you have a small, tight knit culture, you’ve got better communication and you get better collaboration,” he said, adding that at present the firm’s headcount of 15 and current asset size has been “a tremendous advantage.”

He noted that he has seen an uptick in resume volume and quality that comes across his desk since the pandemic hit, with large numbers of investment professionals across the industry in motion. “We’re always interested in talking to great investors … What I’ve said publicly is, if we find the right people, we’ll hire them, [but] we’re not going to have a checklist of what we need to look like every other asset manager,” he said. Smith said that there will continue to be a large number of “bodies in motion” as the current crisis wears on and the industry evolves, which he predicted will be to the benefit of the largest “behemoth” managers and boutiques that can prove their value-add.