Elston Consulting | Best Investment Consultant
Henry Cobbe, head of research, Elston Consulting, explains that the firm that he founded in 2012 designs multi-asset investment strategies for delivery in a number of formats, covering portfolio (via Elston Portfolio Management), funds and indices.
Since 2020 his firm has been largely working with wealth managers and financial advisers and there is now GBP2.5 billion in assets across the strategies that they work with, plus a further GBP4 billion in assets on which they consult, held by four DFMs.
“We launched indices in 2014 and funds in 2020 but we were only working for providers. From 2020 we launched Elston Portfolio Management and began working with advisers as it made sense to work with the people who are looking after client assets,” Cobbe says. “We focus on supporting for wealth managers and financial advisers but we also do some work for university and school endowment funds on asset allocation design, performance analytics and beauty parades.”
Cobbe says that a friend described his firm to be like Coca Cola in that it does the design and the secret sauce but not always the bottling or manufacturing.
“It makes more sense to work with advisers as they have actually got the problem to solve,” Cobbe says. “The world doesn’t need one more fund or index to build and market, but advisers need targeted solutions.”
The big trends in asset management since 2012 include a drive towards the multi-asset solutions, Cobbe says. “We are trying to help them build those solutions. It’s an ever-growing challenge, there’s a tension between cookie cutter, commoditised portfolios and a trend of customisation and highly targeted solutions aligned to different client segments. We see the latter as having a big portion to play.
“Last year, three to four firms asked us to build direct gilts portfolios to use for their additional tax paying clients and so we created a direct gilts MPS service in March.
“Another discussion with an adviser was that their clients wanted a truly sustainable portfolio and weren’t happy with bog standard ESG index portfolios as they felt the holdings weren’t sufficiently sustainable, so we launched a range of portfolios 100 per cent constructed with funds that complied with the FCA’s Sustainability Disclosure Regime.”
Cobbe notes that in 2022 there were hardly any funds in that category but now there are over a 100.
“There are enough now in all asset classes to construct portfolios so there is a reduced risk to advisers, as, if they are marketing something labelled Sustainable, they can say this portfolio is built of funds all complying with that framework.”
The third solution his firm has produced this year arose from demand identified through the firm’s roadshow, with firms saying that it was getting more complex to blend smoothed insurance funds and multi-asset funds.
“These are insurance-linked funds which are popular with clients who are cautious about market volatility. To create an MPS solution which combines and blends smoothed funds with traditional funds, we have an allocation framework that we can use to help keep them both on track.”
Their final innovation this year is the Elston World Equity Factor Equal Weight Index (ticker ELSFEW), which represents an equal weight allocation to six London-listed world equity factor-enhanced ETFs from BlackRock’s iShares: including world equity exposures for six different factors: Value, Quality, Size, Momentum, Minimum Volatility and Yield.
“Concentration around the Magnificent 7 tech stocks has been one of the hot topics of this year,” Cobbe says. “Concentration risk is a choice, not an obligation. Accessing world equity exposure via sector or factor tilts is one way to navigate that. We are really happy that these indices are live as they could lead to potential portfolio or fund solutions for advisers too.”
