Five questions with Versor Investments
Five questions with Metropolis Capital
Metropolis Capital Limited is a UK-based Investment Management firm specialising in global equity investment. It manages a single investment strategy with assets under management as at 30 September 2021 of $2.3 billion. Their objective is to seek return from the long-term appreciation of value and flow of dividends from a concentrated global portfolio.
Metropolis launched their CCF fund in December 2018—one of the first asset managers to come on board after the AMX pooled CCF fund was registered in March 2018.
We manage a highly concentrated portfolio, of between 15-25 holdings, focused on companies that have long-term sustainable cash flows and strong competitive positions. While sustainability is at the heart of our investment philosophy and process, we also want to provide superior returns.
We were already familiar with AMX, their service proposition and how they operated. When the umbrella CCF was launched in March 2018, its withholding tax advantages made it a compelling option. Once we factored in the additional intrinsic efficiencies of managing a pooled fund and the competitive fees that AMX can offer clients given their scale, it made sense to have Metropolis Capital on the platform.
The structure is focused on the interest of the client who can derive significant withholding tax savings. Our investors gained access to a new investment option that provided tax benefits with competitive fees - while we were able to offer a pooled fund which makes managing client assets much more efficient. In addition to three years of compounding the tax differential, performance has been strong and we’ve seen good growth in the fund which stands at more than US$280 million as at 30 September 2021.
Our approach can be characterized as ‘quality value.’ We seek to model long-term company cash flows with a high degree of surety and confidence. As such, we avoid companies where the risk of disruption from climate-related regulation or changes in consumer preference challenge our ability to model long-term cashflows, for example thermal coal and tar sands oil. Less directly, we have ruled out the car manufacturers until we can understand how their business models will look in the era of electric vehicles. The result is our portfolio is typically less carbon intensive than the broader indices.
This focus was relatively unusual a few years ago but is becoming more commonplace now, partly driven by new regulation that demands higher standards of companies and more rigorous reporting. As one example, a recent institutional appointment requires us to manage the mandate with a carbon intensity at least 75% less than that of the benchmark.
Our approach looks both at carbon and climate change risks and opportunities. Opportunities can be found in the transition from conventional to electric vehicles or the emissions reduction from renting more efficient plant and equipment compared with owning and maintaining older and less efficient plant. The key is analysis and identification—avoiding the risks while investing in the growth opportunities.
It was a very smooth operation, even in those early days. AMX has a lot of experience in onboarding investment managers so the documentation process was very straightforward. Typically, it can take up to six months to set up a new pooled fund, but this was completed in a much shorter timescale.
For us, a key advantage of partnering with AMX was the ability to slot into a well-oiled machine. As a relatively small firm, we were looking to build relationships that would help us grow. Having AMX handle client servicing support for this fund lets us concentrate on managing the strategy and identifying marketing opportunities.
Yes, we’ve seen significant benefits in terms of managing existing customers and in accessing new markets and investors. The expert service and quality reporting provided by AMX keeps investors informed and reduces time spent by our team responding to routine queries. Importantly though, the relationship management structure isn’t rigid - any investor who wants to speak directly with us or meet with us can do so quite easily.
Through AMX, we’ve gained a pooled vehicle registered in multiple jurisdictions. This has allowed us to pitch to prospective new clients in jurisdictions where we don’t have a registered pooled vehicle of our own. As an example, we can now offer a Canadian share class, via AMX, in Canada.
We’ve also been able to leverage AMX to augment our distribution capabilities, expanding the reach of our own team. By tapping into AMX’s broad network of relationships, we’ve been able to showcase our capabilities to a wider audience and have had several real successes.
We’ve seen first-hand that the network effect is real – as awareness and utilisation grows, everyone benefits. The flexibility and advantages of the AMX approach delivers significant value to us, supporting our growth and adding value to our investors.
Five questions with Versor Investments
EU equivalence rulings are changing how dividend withholding tax applies to institutional funds