Adam Davis, Managing Partner of the fixed income pioneers, Capital 3PM, tells us more …
What was the original idea behind Capital 3PM?
The original idea of Capital 3PM was to create an end-to-end capital raising advisory business, that encompassed both the sell and the buy side. On the sell side, institutions would engage with us to assist them in their capital raising objectives. This could be anything from a straightforward fund raise for their investment product or perhaps some creative input to redesign their marketing collateral. On the buy side, we would introduce well screened and researched alternative, non-market correlated opportunities to private clients. We were approached by Institutions who were already successfully raising funds in a certain jurisdiction but needed assistance in another part of the world. As my partners and I had decades of experience in engaging with Sovereign Wealth Funds, Private Family Offices, listed Real Estate Funds and private Wealth Managers, we believed that we could create a valuable resource for any entity looking to raise funds from the market.
However, this has changed over the last 5 years as Capital 3PM has become very well known for our ability to simply raise capital across the international space. We now have a specific focus on UK Fixed Income Institutions who are working with some of the world’s largest blue-chip organizations. I would like to think that our clients see us as an integral part of their capital flows into their businesses.
Why do you specialize in Fixed Income?
In the early days of Capital 3PM we raised capital for Hedge Funds, REIT’s and Multi-Asset Funds. What we learnt very quickly was that some of the world’s largest Institutions really dominate this space and we couldn’t really make an impact on the market. At the same time the Fixed Income space was very lightweight in terms of placement agents as the industry didn’t really find Fixed Income exciting. For example, it was far ‘sexier’ to be marketing a Hedge Fund that was delivering double digit returns annually than to market a two-year Fixed Income bond that was delivering around 8%PA. We took a decision to focus our efforts on the less ‘sexy’ offerings that we found in the Alternative Fixed Income space.
Fixed Income is such a broad offering, from the super conservative Government Gilt to the highly risky Tech Start Up Corporate Bonds. We spend much of our time finding Fixed Income that is a hybrid of the two. Stability and predictability of a Government Gilt but with a compelling investment story and track record that makes logical sense in today’s market.
The clients that invest in our products tell us repeatedly that they find our investments exciting enough to catch their attention, but secure enough for them to sleep well at night. Think of our investment philosophy having the innovation characteristics of Elon Musk’s Space X but with the cautiousness of Warren Buffets Berkshire Hathaway.
Finally, we love the fact that Fixed Income always has a space within any investor portfolio, regardless of your attitude to risk. It doesn’t matter what the market conditions are, or how popular the latest ‘in vogue’ investment sector seems to appear, Fixed Income should be a consideration.
You may be a super conservative Sovereign Wealth Fund, an adventurous crypto investor or an avid real estate speculator, we believe you should have some allocation to Fixed Income. It was this opportunity to be able to market to any investor at any time in the economic cycle that made Fixed Income become the core of our business.
Have the recent world events attracted a new type of client to Capital 3PM?
In short 100% yes, we are engaging now in May 2022 with more clients than we ever have before. What were once the ‘go to’ investment markets for most investors are becoming less attractive as we see huge drops in value across the global markets, profit warnings from some of the largest blue-chip stocks which are impacting on usually reliable dividends. Some of the world’s most successful fund managers are suggesting that the market is at its most unpredictable in the last 20 years. Add into the mix the countless unwelcome Crypto surprises and what you have is a very nervous and indecisive investor, regardless of what your risk appetite is.
As all of this has been playing out, Capital 3PM has been quietly growing its private client investor base, attracting casualties of the aforementioned events. We also work with some of the world’s most successful private wealth managers and they in turn are referring their clients to us who are looking for a larger allocation into the Fixed Income space. Interestingly, many private wealth managers would be the first to admit they have pushed Fixed Income to the back of the queue when it comes asset allocation. They now recognize the value and importance of fixed return, fixed term, asset backed and insured investment products. As of today, we partner with more wealth managers internationally than ever before.
Our products have become more and more appealing. In 2020 we had investors who were tempted by our offering, they listened but did not act. Now in 2022, these investors are acting, reducing their exposure to the volatile markets and investing with us. We pride ourselves on the fact that investing is a very personal thing, we wait patiently for investors to come to us, only when the time is right for them.
What are your final thoughts to close:
In summary, we think the next few years are going to be very challenging in many ways. I always thought when the pandemic struck, that the world was going to become a very different place for at least 5 years, and regrettably it feels as if that prediction is already playing out. We have a war in Europe that remains ongoing, showing little signs of a ceasefire. We have inflation at its highest level for the last 40 years. A pandemic, that in certain parts of the world is still wreaking havoc and causing huge disruption to daily life, both for individuals and businesses.
In the investment world we call this a ‘special situation’ – a series of atypical events in the economic cycle that potentially offer an investment opportunity. It is this backdrop that really does lend itself to the investments we have spent decades researching and supporting. If you have not previously considered Alternative Fixed Income investing, our door is always open for both private and institutional investors.