Lawrence Lever: Welcome, Ian Simm and John Ions. Why did Citywire bring you together? This is my colleague over here, Will Robins. I think the reason why we brought you together was, I just thought it’s really interesting that you’re two people that have built really successful businesses. You from scratch and you walked into a place which really needed fixing in 2010, 2011 and you build these businesses up, but you’ve done it in different ways. It would be really interesting to explore how that’s happened and also, coincidently, this year-, you both had an amazing 2021, but this year’s been tougher and you’ve both suffered quite big share price falls, let’s not beat about the bush. So, I think it would be interesting to explore some stories from the past because building a business from scratch is really hard – I tried to avoid swearing there – because I’ve done it myself. Then drill into the nitty-gritty of some things in your businesses, which Will is particularly going to do and then, look at what’s going on now both for you and the industry and how you see things working out in the future. That’s the broad thrust of it.

I thought I’d start with you, Ian, simply because you started the business in 1998 with £15m under management and then, you floated it three years later, with £38m under management. Seven years into the business you had £69m and I’ll put the word in front of it, only 69. So, you must have had some moments when you thought, I should have stayed at McKinsey.

Ian Simm: Yes, so I was at McKinsey in the mid-1990s, but I was really fascinated by solving environmental problems. That was the genesis of the idea and I’d worked out that the way to solve environmental problems was to leverage the private sector because that’s where the money was. So, I left McKinsey because I didn’t really want to be a consultant and spent about a year trying to set up a business in South Africa, in the solar energy sector, which was an abject failure I have to admit. Came back to London and joined a couple of guys who’d set up a corporate finance business in the renewable energy sector. I thought wow, this is a great platform to do something in this space. It was called Impax Capital. So, the name had originated, if you like, in 1994.

So, I joined Impax Capital as employee number five, I think. To cut a long story short, Impax Asset Management grew out of Impax Capital, when the World Bank in 1998 was looking for someone to help run a solar energy investment fund, which of course, given my South African experience, I was really well-qualified to do, relative to everyone else that they could find. So, they hired us and I said, Impax doesn’t need to be just corporate finance, we can do asset management type work, so put the World Bank contract into a separate component, separate unit and that’s how we got started. So, fast-forward, Impax Capital didn’t really get off the ground. We wound it up, but in 2001. We were still too small to be profitable. So, we were looking around for a financial partner.

Had a couple of close shaves with insurance companies, but then we were invited not to float the business, but to reverse the business into an AIM-quoted shell company that already had some other assets, which we eventually divested. So that shell company changed its name to Impax Group initially and then latterly, Impax Asset Management Group. So that’s how we got onto AIM.

Lawrence Lever: That’s how you started, OK. It did take you quite a long time to build the momentum. It is an amazing story from £15m to nearly £40bn at your peak. Were there moments where you thought, not sure this is going to work?

Ian Simm: The thing that’s kept me going, I think, is just this idea that I’m doing what I really want to do, which is helping to solve environmental problems by mobilising capital and the Impax team have found a way to tap into huge pools of capital and to deploy huge pools of capital into solving environmental problems. We broadened that out to this idea of the transition to a more sustainable economy. So, if you like, I’ve had a vocation for a long time.

Lawrence Lever: The vocation kept you going.

Ian Simm: Yes, exactly.

Lawrence Lever: John, I’m not sure there are too many heads of distribution that have gone on to do what you did. So, what was your thinking and again, did you have moments where you thought, is this going to work?

John Ions: I think you always have moments where you challenge yourself. I think if you’re not challenging yourself and if you don’t get things wrong, you’re not learning and you’re not pushing yourself to go forward. To pick up on the initial point there, heads of distribution, when I joined the industry in 1986, everything was run by fund managers and if you look across this industry, we’re very good at telling companies what they do, how they should be operated, you know, the companies we deploy capital in. If you run that same line against how asset management companies are run, you get a weaker output. So, from my point of view, from the skills that you learn on the distribution and the sales side is, what’s the most important part of your offering and it’s the end client.

When I started in this industry, we told clients what they needed to buy, not what they needed, what we thought they should own. I think what’s really happened and I think where Liontrust has very much been, the frustration of that is, it’s happened in politics, it’s happened around the world, the end customer, your client is telling you what they want. So, for you to be good, for you to move forward, for you to offer them the right products, you’ve got to be able to listen to them. You’ve got to understand what they require.

Lawrence Lever: Why did you go into Liontrust?

John Ions: Liontrust presented, really, the platform to develop ideas that I’d thought about and learnt about over the previous part of my career. So Liontrust had been a successful business. It had been based around two individuals, had a proprietary investment process.

Lawrence Lever: But it had blown up.

John Ions: They’d left. Assets had fallen to about a billion, it had been in outflows for seven years and it was probably losing half a million a month. I always say I was lucky. I joined a year after they’d gone.

Lawrence Lever: Had it stabilised by then?

John Ions: Well, the dust had settled, but where it had settled, it needed some engagement. There were some very good things in there. Very strong investment teams, one still very much part of our flagship with Anthony Cross, Julian Fosh there. Managers who had a really good, strong work investment ethic to build on. I suppose the appeal of Liontrust was, we don’t have a chief investment officer. So, if you’ve got a good, strong investment process and process is part of the DNA across everything we do in Liontrust, is you’re free to manage money the way you want to. That sounds very simple to say because all fund managers have got a great investment process for 20 minutes over a boardroom table. If you start to analyse that from what are the checklists, what do you do, how do you apply the same consistency to the largest holdings as to the bottom holdings?

Go through that and if you can get that robustness across buy, sell, size disciplines and that repeatability, that’s what you’re delivering to the end client. Far too often we focus on performance as an outcome. Well, performance comes from having that-, short-term performance is more luck than anything. If you’ve got that good, strong repeatable investment process, those longer things are there.

Lawrence Lever: Where I’m trying to get to is, you were on a trajectory. You were the head of distribution, why did you decide to take that leap? Was it because you weren’t able to implement the things or did you want to own something of your own? What was the thinking there?

John Ions: I think through my career managing fund management businesses, looking after fund managers, doing distribution and marketing, Liontrust was I suppose that blank bit of paper that you could move things forward with. Obviously, in the initial period when it was a business, for want of a better word, could you get the nose up or not? In that first 18 months, we made a lot of changes to the business to get the foundations right.

Lawrence Lever: Such as?

John Ions: So, we got rid of quite a lot of people. We changed people around. We very much focused on, I suppose, the bit that was really broken was that distribution and engagement with the outside client. Not necessarily surprising because if you’ve been in outflows for seven years and every time you pick the phone up people are redeeming or complaining, your desire to pick the phone up and engage. So, it was a lack of self-belief, really. So, culture became very important to the business. How do we drive that forward? How do we create that self-belief in the objectives? In the early days when-, Liontrust office is next to the Savoy. In 2010, the Savoy was undergoing its renovation, I’d walk to the office in the morning, there’d be a big digger outside of the Savoy, we needed a big digger in Liontrust at the same time.

I said to the sales guys internally, at the end of this year, the Savoy will reopen and we’ll do a client presentation there and we’ll showcase our investment talent there and we’ll get our clients in. The question was, would we be able to do that? We’re better off doing presentations with other groups and it all becomes about self-belief. At the end of that year, we put the conference on, there were probably 60 or 70 people attending. Pre-Covid, I think we had 300 people at the conference. To me, that represents much of the growth in Liontrust. If you’re getting it right, you’re getting that engagement with your clients, that’s where we’ve been able to capitalise on the strengths.

Will Robins: I was wondering if this would be a good time to talk about distribution. What I wanted to ask about was, how do you build distribution and you’re saying that was the key, from your background, that was the key challenge you had. You’ve got two companies going about that differently here and I thought it would be great to hear from both of you, just talk through your successes so far and how you did that. On the one hand, how you’ve got to where you have at Liontrust and also, at Impax, the international nature of that, some of the deals that have helped.

Lawrence Lever: Maybe starting with, I think it’s 2007, your BNP Paribas deal. Maybe unpick that a little bit because that’s obviously, a major relationship for Impax.

Ian Simm: Let me go back a little bit further. We had the World Bank contract, that was a starting–

Lawrence Lever: That was £15m, was it?

Ian Simm: Yes. $25, in those days, £15m. Then in 1999 and 2001, I was approached by a Danish group and a Dutch group, both in fund management who wanted products in the environmental space, listed equities. So, I find myself with Bruce Jenkyn-Jones, running sub-advisory accounts for both those two groups, with the same underlying portfolio of stocks. Then we raised an investment trust in 2001 with what was then, Dresdner Kleinwort Wasserstein, I think, it is now the team at Investec. So learnt, in the very early years that there were groups out there who’d be willing to do all the spade work around distribution and hire us for our investment talent. But at the same time, was quite entrepreneurial and willing to get on a plane and go to places like Japan in 2006 and the US in 2005 and constantly around continental Europe speaking at conferences, seeing old friends.

So, by 2006, 2007, we did actually have a deal with BNP Paribas in 2006 to do sub-management work. They came in as shareholders in 2007. We had a bit of a patchwork quilt of direct relationships who’d come into our Ucits fund that we launched in 2004, but then, more of the business had come through sub-advisory or sub-management contracts. So really, up until maybe 2011, 2012, we didn’t really have what you might call a coherent distribution strategy, it was just a patchwork quilt of relationships and opportunities that we’ve seized on. Bearing in mind that what we were doing in those days was pretty niche. So, you had to uncover a lot of stones to be able to find a client. That took us, literally, around the world. So, I was in Australia talking to clients in 2008 when we won our first mandate out there. Probably had four or five trips a year to the US between 2005 and still doing four to five trips a year to the US for a week at a time.

Lawrence Lever: Did you ever feel people weren’t listening?

Ian Simm: Yes, of course, but because of the overriding passion of this is what we want to do and by the way, we’ve found a way that you can make brilliant risk-adjusted returns in it so it’s a very good story. We just kept on going until people actually said, not only we like it, we appreciate the story, but we’re willing to put some money behind you. We normally won in the first of those two, but then the challenge was getting the resonance, the complementarity between what we had and what the market really wanted.

Lawrence Lever: Did you ever work out what your success rate was?

Ian Simm: Terrible.

Lawrence Lever: One in every 30.

Ian Simm: I don’t know. The typical trip around the States, for example, in 2008 with our third-party placement agent would probably be 20 meetings and we might get one investment from that.

Lawrence Lever: So, you really had to have belief.

Ian Simm: Yes, but that one investment, if it was $50m or something, made a difference. So, it was worth doing that in the relatively early days. Still 10 years in, of course, but yes.

Will Robins: I guess in terms of the future, where’s the next St James’s Place or BNP coming from? I think you quite recently hired new distribution heads in US and Asia.

Ian Simm: Yes. So, during the Covid period, I decided with the board, that we would restructure, if you like, the client service and business development team. So, bringing in a more experienced salesperson in the US and then moving Meg Brown, who was doing sales, client service and marketing in Europe, into a global role with product and marketing and leaving a space for a salesperson. So hired Paul Voûte from Federated Hermes to take that sales and client service position. So really, very much now trying to move back towards direct distribution. So, the sub-advisory, sub-managements great when you’re getting started and the fees are not too bad and it’s quite profitable business, but you don’t own the client relationship.

We’ve found over the years, owning the client relationship just leads to more business and ultimately, more profit. So, what we’re trying to do now over the next 10 years is to significantly increase the direct distribution, which is why we’ve hired Paul and then, Ed Farrington who came from Natixis in the US.

Lawrence Lever: You’re not inhibited by some of those distribution deals where they say like in Europe it’s got to go through BNP Paribas.

Ian Simm: Yes, but only in a very narrow context. So, there are walled gardens, in you like, in a couple of the distribution arrangements, but we’ve been quite careful to make them quite tight so that there’s plenty of space to go elsewhere.

Lawrence Lever: You’re defining the segment where exclusivity applies.

Ian Simm: Product plus segment plus geography overlaps. So, there are three factors that govern.

Lawrence Lever: Product, segment, geography. John, you’ve gone about it very successfully, but in a completely different way, I would say.

John Ions: When I joined, Liontrust was in a state of flux. So, at the same time, we were restructuring and cost-cutting our cloth, it was about which parts of the business were we going to invest in? Which areas do we think don’t work, are broken? So, at the same time, I was cost-cutting, we were investing in the marketing and the distribution side. That was not, if you advertise it’ll sell. If was, if we don’t believe in ourselves, how are we going to get our clients to believe in ourselves? So, it was the promotion of the business and the brand, but there was an awful lot of investment in the infrastructure of the business. Certainly, on the distribution side. What I mean by that–

Lawrence Lever: Before you go on to that, you said the promotion of the business and the brand. The brand was tarnished so, you must have done something to change that brand.

John Ions: The brand was tarnished, but it was only tarnished in the fact that it was a business that had been successful and had fallen by the wayside. It’s a hugely competitive industry. If there’s any question of uncertainty about a company, there were plenty of other businesses to look at. So, it was very much back to what I said about self-belief, but to do that, you’ve got to make sure that you’re getting your job right and you’re doing the right things. Asset managers have a huge amount of information. The problem about that information is, it sits on different systems. Those systems are cumbersome, they don’t speak to each other. So, any of the quality data you’re looking to get out of it is out of date. So we had to it to make all of those systems talk to each other so we could analyse what was happening with the sales side, what was happening with the dealing side. What industry data was out there. Where were areas where we had investment strength. We could target that against what our share of that investment was with other people. Market share data. So, we could set parameters by which we wanted to go. The other side is, it’s then organising yourselves efficiently. We have a phrase internally called the relentless pursuit of the basics. If I could come up with a new way to manage money or I could come up with a new way to distribute, we would do it. On the basis that I can’t, what I’ve got to make sure is that we do the day job as best we can day-in-day-out. I know if we do that every day, that will give us an edge over the rest because they’re not.

So, it is very much that collaborative culture across the business, that everybody inside the building is supported by everybody else that’s working there. So, you’ve got to do your job as best you can because that creates the opportunity for everybody else to do their bit. You get this collective team and the power of the people inside Liontrust is that unity and goal culture that moves it forward.

Lawrence Lever: What did you do on the distribution front that changed things?

John Ions: We reorganised some of the areas we were looking at. We started to look at the things that we could win at and we could focus on to start with. One of the beauties of my job is that people are not short of giving me ideas about where we should be selling things. If you look after the people inside your business, time’s the most precious commodity you’ve got, ie, how much time does it take me to do this and if I’ve got the opportunity cost of where am I going to take that time away from? So very much to focus on the parts of the market that you could provide the solutions for and not to get distracted by other areas, which in the future, you can grow into, but you’ve got to have the appropriate resource to be able to do that.

Lawrence Lever: Give us a concrete example of focus on the parts of the market where you could have impact, on what you did.

John Ions: Day one, Liontrust historically, in the past had been very much an institutional business and not that big on the retail side. Now the institutions, given the change and flux that Liontrust had been through, I knew with the engagement with consultants and one of the large client consultants that I went to see probably, in the first month, their opening line to me was, ‘Liontrust, why bother?’ So, I can now spend the next two or three years explaining to that audience what’s changed and where we’re going to go or I can go back and I can demonstrate that and prove it that way round. Actions speak an awful lot louder than words in that instance. So, we focus very much on retail. We focus very much on this communication at the end.

Lawrence Lever: UK retail.

John Ions: UK retail. This is an industry that has developed its own language to a large extent, to make it impenetrable, for people not to understand what’s going on. If I write to clients about the shape of the yield curve, you lose half of them. If I talk to you about the transition to cleaner, greener energy, decarbonisation, these are things that people can relate to. You’ve got to understand what goes on in the mind of the advisers that we sell to. In any client meeting, the investment context is probably 5% of that adviser meeting with their end client. They want to be able to have confidence and understand what’s been said. So, the importance of selling on the process side, this is what we will deliver, this is what you should expect. Accepting the fact that there will be periods where the markets will be favourable and there will be periods where they won’t be favourable. It’s no deviation away from that. It’s that unexpected risk that makes people move away you on that sort of impenetrable side. So, the quality of the communication. Looking at different ways we communicate with clients, monitoring what works, what doesn’t work. An awful lot of things you will do here at Citywire, we know what’s successful in email campaigns. We know what’s successful if we embed things in videos. Instead of putting fund managers in front of a screen, if we stick them in a factory. What makes those things real and people being able to relate to them. That message there, how does that drive traffic across everywhere else. The marketing department has a huge role. Simon Hildrey runs that at Liontrust – drives the story.

Lawrence Lever: Simon is ex-Citywire.

John Ions: Well, he was very well trained from that point of view. It drives the messaging and the stories. One of the things that’s probably quite special or different about Liontrust is the relationship between the sales team and the fund management teams. Historically, where I’ve worked, they’ve always been, actually, do I have to do more marketing presentations or why am I not being sold or why am I not being taken out? We sit down at the beginning of each quarter. We talk to fund managers about what we’re going to do with them. At the end of that quarter, we review what’s happened, what’s going forward. The sales team work very closely with the fund managers on presentations. Every presentation starts with 60 slides. We know that 15’s probably about the right number to get that message across. So, it’s simplifying that message. Ultimately, you can see it and you can see it in the results, last two years, Fund Manager of the Year Awards. It’s that ability to resonate value out of the client base. We’ve got a huge amount of activity that goes on. Today to pick one day, we’ve got one team out presenting. This is seeing probably 110, 120 people in different forms of breakfast meetings, lunches, one-on-one meetings. If you go down onto the salesfloor at Liontrust, there’s a whiteboard which will have 20 events going to the end of the year. We know what’s happening, we know what the message is. We know what’s going to be supported around that. It’s about organisation, right?

Lawrence Lever: A lot of what you say seems to me, common sense and ought to be done by everybody. A thing I picked up in what you said is that you think a lot of groups are dysfunctional.

John Ions: I think you let emotional bias get into things. People tend to gravitate towards things that are easier, more comfortable, but if you’ve got the data and you can analyse that, you can look and say, these are the areas that we need to focus on. This is what we need to look at. Not just defaulting to the funds that are popular. It’s always the same in times of turbulence, volatility, you have to speak to your clients twice as much as you do when things are going up. It’s just that emotional side of it. So having a plan and a structure is the only way I think you can do the job efficiently.

Will Robins: I just wanted to ask Ian the same question, but one of the differences is, how many of your clients are institutional? I was interested to see how you approach that in terms of content or data and how you engage them?

Ian Simm: In a way, all our clients are institutional because we don’t have a retail license in the UK or really, anywhere else. So, although 60% of our business is intermediated. So, wholesale through the likes of St James’ Place. Some of our direct subscribers in the Ucits funds would be groups like Rathbones, but we have to treat Rathbones as an institution. So, in that sense, our marketing is all geared to impressing institutions. I think just building on what John was saying, we have to recognise the market has been changing. So, one of the ways that other groups fall short is that they’re not seeing how the market is changing, becoming much more disciplined, much more rules-based, much more process driven.

That fiduciary responsibility is coming through on the client side as well. Therefore, your sales teams have to adapt. They have to be feeding back to the CRM, if you like, the customer relationship management system, process. Not just the software. How the client’s governance and decision-making is changing. If you’re on point on that and nimble, you can get ahead of the competition.

John Ions: I think what’s important very much here, my view is what I wanted to bring was the investment discipline of the institutional framework to the retail market, but the retail marketing skills more to the institutional side. I think it’s now morphed into one. The shift of defined benefit to defined contribution means that everyone of a working age has a form of investment and a pension. We saw quite clearly, through Covid where people who were at home had more time to interrogate these things, took much more ownership and interest in what was going on there. I think, therefore, how you communicate that message and you engage with that part of the marketplace is vitally important.

Will Robins: One of the things you’re alluding to there is, you go on your website, the big message you get is about sustainability and obviously, reflects the real changes at your business that have moved you into that space. Obviously, we’ve got long-term sustainability-, pioneer here as well. I guess to ask you first, why and to what degree you’ve thrown your chips behind this and what it’s been like transitioning into that market?

Lawrence Lever: Was it opportunistic or planned?

John Ions: It was definitely planned, I can tell you that because Katherine Garrett-Cox, the previous chief exec at Alliance Trust, when we bought the Alliance Trust business you’re referring to, she and I had had conversations probably, over two years about being able to move forward. Probably just at the point where we were going to sit down and talk, Elliot, who was the active investor in Alliance Trust at the time got involved and six or nine months later the business was put up for sale or the investment trust was moved out and the rest was sold on. So, when we sat down to discuss with the management about that, we were able to explain, this is something that we want to do. It’s a belief, it’s an engagement that we want. If you think about it in its most basic terms, what do we do? We deploy the capital that allows the economy to function. Surely, we should deploy that capital in responsible way and a sustainable way moving forward. I think an industry that has historically competed on price or performance, neither of which are areas of competitive advantage because as you can see with the rise of passives, price competitiveness can be eaten away and performance isn’t a form of competitive advantage because you don’t have to be bad, somebody can just be better. So, you’ve got to be able to align your goals with what investors want. I think what has happened and what you’ve seen as much as the questions that used to be at the end of a client meeting are now upfront and central at the front.

Those are the things driven by the clients. So, this is the opportunity where this is what we want to do, but it’s also the time when clients want a better outcome. So, from our point of view, you can see the success of that business. When we bought them, they had £2.3bn of assets under management. They had a 16-year track record from their Aviva days to today, which was very good. Then the assets have gone to £13bn, £14bn in the last five years. Now that team has continued to do what it says on the tin through that time period, but it just shows you now, failure to listen to what the marketplace wants, but to be able to deliver what they want will bring you success.

Will Robins: Ian, how do you view the transition of asset managers into a space where you were somewhat of a lone voice for so many years?

Ian Simm: I think it’s just important to go back to first principles about what Impax is trying to do in our investment philosophy, which is quite differentiated and very consistently applied for more than 20 years, is that we believe that the economy is being transformed by technology change, by policy, by changing consumer preferences in the direction of what we call a more sustainable economy. So that’s manifest in the electrification for drive, train and transportation or the switch to renewable energy or efficiency in water management and many other drivers, if you like. So those drivers are leading to two things. One is high growth in certain pockets and second, is mispricing because the average investor is misunderstanding the potential of companies. Not just undervaluing them, but sometimes, overvaluing them.

So, if you put that into an investment management context, I think it’s quite compelling to say that an investment team can pursue alpha, if you like, excess outperformance relative to a benchmark by applying skill and understanding those drivers of valuation factors. And building portfolios to pursue that aim. So, the consequence of that as a starting point is that you can be a capitalist and still back Impax. If, in addition, you’ve got investment beliefs or investment objectives that are non-financial, so you want to be more responsible—we could discuss what that means exactly. If you want to be more responsible and you want to have positive impact, you want to be socially aware in the way that you’re investing, then the results of the Impax portfolios allow you to check that box.

If you’re neutral on those things, which many of our clients are, then you can still be a happy Impax investor. The really powerful thing about that approach is that we can tease apart investment beliefs on the one hand and the pursuit of great risk-adjusted returns on the other and speak coherently and cogently about the two and then put them together at the end.

Lawrence Lever: I don’t think you’ve answered the question, unless you’re saying what you’re doing is so different from what everybody else is doing that it doesn’t bother you or you don’t even notice it. You’ve been a pioneer in the wilderness for years. Finally, you get heard and then all these other people dive in as well.

Ian Simm: I think in a way that’s validating the idea. Growing the market because the actions of John and many others are raising awareness of these opportunities and Impax can benefit from that tailwind if you like. So it’s very healthy when you go to a consultant, and if you’ve not met them before and to be honest, we’ve been around for long enough to have met most of them, but if you go to a consultant that you don’t know very well and say, this is what we do, this is the investment approach and give them the due diligence questionnaire, if they’ve got another due diligence questionnaire from a manager doing something similar, then that starts to create a little bit of comfort in their eyes, that this is something worth pursuing because several investment managers have got on the same train. Then, we’re in a competitive shootout as to who is most suited to the client opportunity in question.

Lawrence Lever: Do you guys ever end up competing with each other?

John Ions: You asked me on a previous article I’d done, why did I see a competitor in Impax? The more people in the space the better, as far as I’m concerned. The better for the outcome globally and sustainability going forward. You compete by doing the best you can in the space. The more people are there, the more noise around it, the more promotion it gets. I don’t think you ever compete. You look at the standards that Impax will set and we want to make sure that we raise ourselves to those standards. In a world of sustainability, we’ve debunked the myth that the two have to be separate. You can have a greater good of investment, but you have to forego returns. I think the last 10 years has shown that you can get very good risk-adjusted returns from companies that are changing things and moving forward.

I think the complications and the skill is, how do you bring that into a modern investment world going forward, where you’ve got, if you like, old world and new world businesses. Do you just screen out carbon-emitting companies or do you use the fact that in a broader responsible capitalism investment approach, that what we want to do is use our power in the deployment of capital to make change, to get change. Just simply not investing in something to me, is not an option because you’re ignoring that. You’ve got to use it to go forward and to drive that change.

Will Robins: One thing I wanted to ask you was, you were able to bring in sustainability expertise and I think with that, you’ve got a head of ESG. Is it Peter Michaelis?

John Ions: Of the sustainable team, yes.

Will Robins: I’d be interested to talk about that role because there are heads of ESG at other asset managers. I wanted to ask you with regards to your own company, just what that challenge is or how that individual’s going about leading the rest of the business, the other fund managers into what I’m guessing is a more companywide ethos, rather than it just be sitting with a particular team?

John Ions: So, Peter sits as the head of the sustainable team. We have a head of responsible capitalism, Cindy Rose, who joined us from the Majedie acquisition. So, Cindy has to look at where all of the teams-, so if we’ve got a sustainability team there at the top setting the standards and the bar at that level, how does that fit in with the other teams? Where are we moving with those teams and what are their investment approach? That’s got to be very carefully managed between what’s the underlying investment process of the teams? So not to go and say, we want you all to do this, to do that. It’s about how do we work to get into that point. We can only move as quickly as the lowest common denominator.

That is an awful lot of that change management is helped because it’s client pull. I said earlier, those questions have moved from the back of a meeting to the front of a meeting. I think if you don’t address and you can’t demonstrate what you’re doing to make that more positive change, you’re going to be left more in the wilderness on the fund management side. After all, it’s about delivering and satisfying client needs, requirements and wants. So, across the group, we look at that. It requires an awful lot of investment internally and data to be able to demonstrate what’s going on, to be able to say to managers this is where we want to be, this the effect of some of the decisions you’ve been making. To be able to prove that and the clarity of that.

Lawrence Lever: Are all the managers shareholders in Liontrust?

John Ions: Yes.

Lawrence Lever: To get these messages across, it’s really good if they’ve all got a common-…..

John Ions: Everybody in Liontrust is a shareholder. So, we have a share ownership scheme that everybody subscribes to. Again, it’s part of that, talking about culture ethos beforehand, everybody’s involved in this. It doesn’t mean everything isn’t questioned or asked about, but it’s making sure that the regular integrity of the investment process stays there, but how do we bring these things in and what level do we bring them into where we go to and how can we demonstrate that clearly to clients going forward? At the moment, we’re in a world where the most used phrase is, well, it’s one of two. It’s either greenwashing or sustainability is integrated into my investment process, whatever that means.

So, you’ve got to be able to demonstrate that to clients, to show the output from the decisions that you’re making.

Ian Simm: Can I just pick up on this ESG point because I think it’s really important to call out the fact that it’s tripping the industry up. If you go back to the origins. When I started the business in 1998, ESG didn’t exist as a phrase. It was invented, literally, by three consultants in 2004 for a UN conference. What they wanted to do was have a conversation about governance on the one hand, which was a real issue then, after Enron and WorldCom scandals and ethics, on the other hand, the purpose of capitalism. Are we damaging the planet? So ESG literally came from that clever idea to have a conversation. [marker 0:40:00] So fast forward 18 years and this has become the hot rock in the industry.

The reason it’s a problem is that it conflates two really quite different ideas. One is investment belief. So, what do you want your money to do? Do you have views about doing no harm or social impact or environmental damage? Ethical if you like and then, there’s a challenge around, particularly risk, but also, around opportunity. So, what we’re trying to do at Impax is focus back on this idea around industrial revolution, sectoral transformations. Very consistent with the E and S of ESG. Look for high-quality companies that are well-governed, but don’t use ESG as part of the sales pitch, part of the positioning because we want to have a conversation with our clients about risk-adjusted returns, about alpha. We want to listen to them, to what their values are.

If they want to see our ESG work, we do have an ESG line in our process because we want to be able to check the box, but that’s really a metaphor for a radar sweep of all the issues that you should be looking at in that search opportunities and calibration of risk. So, I really hope that the industry, in time, can move on from ESG as a label.

Lawrence Lever: Listening to you both, I wondered what your management style was. You’ve got to persuade people. You’ve got to bring people along. So, if you had to summarise your management style in a few words, what would it be?

Ian Simm: Collegial, objective and problem-solving. Ambitious. Patient. Those are all the good things.

Lawrence Lever: Are there any bad things?

Ian Simm: Hopefully not.

Lawrence Lever: John, what’s your management style?

John Ions: Decisive. There’s good decisions, there’s bad decisions and there’s indecision. I’m not going to get all my decisions right. I get some right, but it’s the indecision that screws businesses up. It’s people sitting there saying, should we do this, is this the right time? Should we wait? That failure to want to move forward, to push boundaries. To move into areas of uncertainty. It’s a shared belief that everybody’s got to be that. We have a very flat structure at Liontrust. Often, walking around the floor talking to different teams or people in the business, I get–

Lawrence Lever: So, visibility.

John Ions: It is key to me and communication to people. People understanding. If I’m asking people to do functions all the time, they’ve got to understand how that relates to the other parts of the business. Why it’s important that data is collected here that goes to a fund manager that goes to a sales team that goes through marketing. How does it all link together? Too often you look in big houses, people work in siloes and the importance of what you’re doing is only important in your department. You’ve got to understand how important it is to other people and how much they rely on each other within the business. If you can get that communication, get that message across, you’ve got a really powerful operation.

Lawrence Lever: So, you’re also collegiate and you believe hugely in being visible and in communicating and decisive.

Will Robins: I wanted to ask, not to be too reductionist, but I read in a recent report of yours, a Responsible Capitalism report about a decision you were thinking about, of introducing new KPIs around diversity, carbon impact for the company and/or for the individuals working in it. Perhaps clarify that. I wondered if you had adopted those or where your thinking was in terms of introducing those KPIs?

John Ions: One specific thing, we’re always looking to set the highest standards we can possibly attain and I think without KPIs, without trying to become hugely formulaic, if you’re pointing in a direction or you’re going on a journey, you need to know what you’re trying to get to. You need to have measurables, both short, medium and long-term to go to. The short-term ones being, obviously, much more focused and much more attainable, but you still need that longer-term direction of where you go to. I think setting our own goals and targets is vitally important. If I think about the broader approach on the sustainable responsible capitalism side, you’ll have a whole load of ratings agencies that will mark you for different things. Now, you can look at what they mark you on or you can set your own standards and assume that if you achieve those goals, everything else will follow. What I explain by that is, you’ve got to be master of your own destiny on those things. If you try and set your targets for what is naturally accepted as a benchmark around the industry, you will only at best, ever become average. So, there’s an awful lot on the internal side, that we set our own goals and targets and we know that if we achieve them, we should be a level above elsewhere.

Will Robins: I guess it was, are you going to adopt a KPI on something like diversity, for example?

John Ions: We definitely do. We have Black History Month now. We’ve got strategic and training initiatives going on within the business. The power of having a diverse workforce and culture within that, we think that adds strength and competitiveness to us. You certainly don’t want one line of thinking that goes on. You want the system to be challenged. If it’s strong enough, it can be challenged by anybody. People disagree and then we can have the debate about how we move forward with things. With this industry, it’s very much that we’ve got to encourage-, it’s the new entrants of people coming into it. Try and get as broad and diverse operation ] from picking from a selection there. You’ve got to grow it from the bottom.

We’ve got to look at how we train, how we educate. How we make the industry appealing, attractive to people. We’ve got to debunk an awful lot of the myths that exist around that. If we can do that and achieve that, that’s how we get that. If you set targets that say, I must have the following, you’re setting the system up to fail. You’ve got to support the growth in it all the way through.

Lawrence Lever: Do you have targets?

Ian Simm: We do have targets. On gender, we want to be between 48% and 52% women by 2025.

Lawrence Lever: Over the whole company.

Ian Simm: Over the whole company.

Lawrence Lever: Where are you at the moment?

Ian Simm: A year ago, we were 45% and I think we’re now at around 48%. So, we’ve made significant progress. However, within that of course, there’s the dispersion around seniority. We’re not setting a strata target. To John’s point, I think what a target has done is, it’s focused both our HR department and the senior management on looking for female candidates in the process a little bit harder and maybe taking a little bit more risk when there’s the subjective decision about do I go for candidate A or candidate B at the final round. On ethnic diversity, we’ve got a very strong advocate at that in Darren Johnson, who’s our global chief operating officer, comes from a Ghanaian family. He’s been very passionate about bringing in black and ethnic minority representatives in the firm.

I can’t remember the number, but I think we’re well over the London average of 6%, I think. Then on carbon, CO₂. Again, setting a target is probably not very meaningful in the context of a rapidly growing company, but we do have a target of being net zero or net positive. So, we offset all our emissions, particularly from travel, but also from the offices with our investments in our renewable energy funds, which are then avoiding carbon when they’re deployed. So those targets plus mindset and management tools is quite an effective way of tackling those issues.

Lawrence Lever: You guys have both had a great run, but interestingly, both your share prices are down 60% this year. I can see why, it’s associated with technology, the fall of technology and the fall of growth, issues such as that. Actually, the published figures show still positive flows, so why are your shares down 60% – you have both been buying –and how much do you care?

John Ions: You always care, but in the short term you’ve got to accept the fact that there’s not a lot you can do about it. If you do the day job correct every day, the share price will take care of itself. A year ago, where you had very strong multiple expansion in businesses that were seen as the high-growth areas. So, what you’ve seen now is the share price, that multiple come from 23 times down to six or seven times. So that PE compression has dragged the business down. Look at the other side, as a listed company, if I look on the day-to-day basis, what’s going on in the business. So, the fund management teams, strength of their conviction, all my fund managers, were they twice as good a year ago, are they half as good now? No, they’re exactly the same and they’re sticking to exactly the same things that they were doing. On the sales we’ve got huge amounts of engagement going on. Everybody in Liontrust owns shares in the company. So, from my point of view, when everybody’s going up, did that affect culture? Was it a happier place?

Lawrence Lever: Was it?

John Ions: Well, if I look at it now, I don’t think so. From a personal point of view, if you feel wealthier are you happy? The questions we look at to see, does it cause concern for people in the underlying health or conditions of the business and I think, from the activity that goes around, what people can see and that sort of thing, it hasn’t changed things like that. If I look at the internal deal sheets, internally there we are buyers of Liontrust stock, not sellers of it. So that belief and passion within the business, I think still exists from that point of view. The fall has been significant, I think it’s in the region of 60% year-to-date. Interestingly, we saw a rally in the market two days ago. Now, that in itself, Liontrust share price, Impax share price was probably up 10%, 11% on the day. That itself is not important, but what is important is, as two companies in the financial services that probably bounced the most, it’s a belief by the outside world the company’s not broken, it’s still working. We’re operating in harder more difficult conditions but everything we’re doing you just believe that we’ll come out of it stronger on the other side. When we went into Covid, the Ukraine invasion. I can’t tell you what will happen to flows, I can’t tell you what will happen to stock markets in the short term, but what I can tell you is that our goal is to come out of the other side of that with a higher market share.

That’s very much what happened through Covid. That’s very much what I believe will happen now. It’s the doubling down of the efforts, now internally, within the business. So yes, the share price does affect sentiment, but for me the important thing is, it doesn’t change culture. You don’t have negative opinions internally, which then create the outcome. People are going to say, right this is the share price, we’ve got to double down, we’ve got to work harder and it will go back up from that point of view.

Ian Simm: Just looking at the fundamentals, we started our financial year, 1 October 2021 with £37bn under management. The end of August, we put on our website £38bn assets under management. So positive flows, even though markets were down, offsetting the drop of NAV. So, if you apply normal revenue margin to that, revenues should be up. If you do back of envelope, outside calculation. Our cost base has definitely gone up because we’ve been hiring people to cope with the huge amount of new business we picked up in 2020 and 2021. So, people should expect that the costs have gone up. But then as you say, share price is down 60%.

Of course, in a world of rising inflation and rising interest rates and rising expectations of interest rates for the future, discount rates go up, so therefore, valuations for all stocks have come down, which we’ve seen across the market. So that’s not a surprise. I think we also have this factor of the UK being less interesting or less attractive to non-UK investors for all the reasons that are well-rehearsed. That I think, is affecting all of us. So very much like Liontrust, the business is rock solid. We’re continuing to see a very strong pipeline. Our franchise continues to grow. Yes, it’s been a terrible year for markets, but it’s also been a terrible year for the planet. With floods, wildfires, droughts and storms, hurricanes.

So that just sharpens the mind for those ethically minded investors, but also, for those who are objectively looking at risk. If they’re wanting to get exposure to fund managers who are taking that medium- to long-term comprehensive view of these issues, then of course, Impax is a great place to go. Put that together, then I think we need to get out on the front foot and hopefully, in the context of stabilising conditions over the next six to 12 months, which is not guaranteed, but hopefully, it’s not going to get too much worse, we ought to be able to sort of pick up again. Yes, it does matter. Management owns 21% of our business, including myself. BNP Paribas owns 14%. Then we’ve got a majority owned not just by small-cap fund managers, including Liontrust, of course.

John Ions: They held on to the stake.

Ian Simm: Yes, indeed.

Lawrence Lever: Liontrust managers own about 8% or 9%, is it?

Ian Simm: There or thereabouts. Certainly, top five.

John Ions: I think the point that Ian mentioned there, we’re owned by UK fund managers. So predominantly fifty businesses, but owned by medium to small-cap fund managers. If you look at the flows in those markets, certainly on the mutual fund side, they’ve been in outflows for five years. UK equity weightings have continued to get lower as we’ve seen this transition to more global investing or the active appeal of the UK market. So, it does that doubling-down effect. The fund managers that own us have seen outflows from their funds because nobody wants to own that. So, I think one of the challenges, one of the things that I look at is, how do we improve the appeal of Liontrust to a broader shareholder base. So, looking at global small-cap funds or doing that.

Lawrence Lever: There’s an investor relations job to be done.

John Ions: I think it’s quite a significant problem for the UK stock market in terms of–

Lawrence Lever: How do you attract overseas investors?

John Ions: Yes, how do you get overseas investors coming in? How do UK companies raise the capital they need to if the natural bias of those people is historically lower. We’ve seen this–

Lawrence Lever: Have you guys considered an overseas listing for your shares at all?

John Ions: No.

Ian Simm: We’ve considered it, but not for very long, it’s very expensive and it requires a huge amount of investor relations in other places like the US, for example. So not on the cards.

Will Robins: I like some of the inside-baseball stuff at asset managers. Ian, you’ve got a chief people officer. I know this role must exist elsewhere, but I think it’s quite visible on your site, someone called Mary Alexander who’s got some interesting background. A spell at MIT, PayPal, that’s a really well-known business.

Ian Simm: Tobacco, mining, she’s been around the track.

Will Robins: Basic details that are there, she joined at the latter end of 2020. Was that a role that was devised following the pandemic happening or not? And just generally, it would be great to know what she does and what impact she’s had on the company.

Ian Simm: It’s a 2020s label for the head of HR. So, it’s not doing anything more than what a high-quality head of HR would do at another financial services business, but Mary’s brought a huge amount of energy, experience and passion to that role. We’ve expanded our headcount, I think from around 170 or so when she joined, to 260.

Lawrence Lever: You’re 260 now. How many are you?

John Ions: 250.

Ian Simm: So, the percentage increase has been quite significant in a relatively short period of time and that came on the back of the acquisition that we made of Pax World Management in the US at the start of 2018 when we were 70 people and they were 50. So, we had an integration challenge to put 50 and 70 people together. 120, that grew in two years to about 160, 170 and then a further leap to 260. So that chief people officer role is absolutely critical. Not just in attracting the right people, but also, advising me and the executive committee and the board, about how to provide the glue and the processes to expand and develop and also, cement our culture.

Will Robins: Interested in what are the challenges, the personnel challenges of a modern asset management business?

Lawrence Lever: Especially, also one that’s acquired loads of other businesses.

John Ions: I think through the acquisitions, if you understand our growth policy or strategy is things that we can affect on a daily basis or the organic growth. So, the next thing is talent or acquisition hire. The problem with talent or acquisition hire, there are two things. We can create the right environment to draw people in and to make managers leave other companies to come and work for us because its’s a good place to ply your trade and to develop and be successful. The other part of the strategy has been acquisitions. The problem with talent acquisition is it takes three years to get a three-year track record and you’ve got to nickel and dime it to get the first two or 300 million in an asset class because you can’t engage with your larger clients.

So that brings in the acquisition side. We’d never buy businesses just to fill siloes. I think it’s an unprofitable way to grow your business, but if I can use it to fast forward grow your own. So, if I can bring in businesses, teams, people that either improve manufacturing, fund management skills or bring distribution strength, I’m moving along that curve faster. Then the people who bring it in have got the same shared goals, visions, desires, objectives, it’s bringing it together, but bringing different cultures together is difficult. We bought the Axa business through lockdown. Part of that was in an acquisition, myself and Vinay Abrol who runs the business with me, were either running in or out of buildings quietly, trying to have discussions with people we want nobody to see or to be seen have taken place.

Through Covid, because everyone was remote, we had access to a much broader range of people to ask questions. So, we probably went in to that acquisition with more management information than in any deal we’d ever done before. The corollary of that was bringing people together, executing that deal, the cultural gelling and the bringing people in, we struggled with. I think we’re getting it right now, but it’s much easier, physically, to get culture and do the high visibility communication, if everybody’s sitting at home in a room, it’s very difficult to get a culture and to make the change from the culture that existed maybe, in the previous organisation.

So, we work hard at that, but how it goes across the business is always a challenge, but it’s always things you’ve got to check. We do surveys internally as to what people’s views are. How do we appeal to all parts of the workforce? Are we offering the right kinds of training, development and everything going forward? As long as you’re prepared to listen, again, it’s good, bad and indecision. As long as you’re making decisions, you can always change them for a better one.

Ian Simm: I think from our perspective, there’s a virtuous circle between having the right culture in the organisation that’s about to grow. That’s about structure, it’s about people having the right job descriptions. It’s about communication, it’s about values. It’s about the glue around activities for junior, middle and senior employees that bring people together. So that’s a starting point. Then you need the right process to attract the right people to go into, not just the organisation for day one, but the organisation that’s three, four years from now. So, we’ve got target team structures for 2025, 2026 that we’re bringing people into with a mind for where we’re heading.

Then the next thing is, of course, integrating them, training them and making sure that they’re part of the system. Then that of course, feeds back to the bedrock that you then need to bring forward to the next recruitment.

Lawrence Lever: I think we should talk about the future, how you both see the future for asset management and your own businesses. Look at the share prices, it’s not just you guys. Generally, you see loads down 40% , I am talking quoted asset management around the world.

John Ions: The last thing you want to do when looking at people’s savings is worry about the short-term. These are people who investing, are accumulating wealth for the future. There is a pensions shortfall in the UK. So, the asset management industry has a vital role to play in that.

Lawrence Lever: Not just the UK I would have thought, the world.

John Ions: Globally and also, from an environmental point of view, from a social point of view, how we deploy that capital is going to be vitally important to the world that we live in and our children live in going forward. So, I think we’ve got to hold ourselves to the highest possible standards. We’ve got to learn to get away from this impenetrable thing to being able to communicate, to be able to–

Lawrence Lever: Do you think that’s still an issue?

John Ions: I think it is. I think if you think about the penetration. If everybody’s got a pension, how can we have the lowest amount of trust of any industry going. How do you build trust? You meet new people, at dinner you’ll talk to somebody, you’ll have a drink with somebody, you talk to them. Then you become friends because you trust them and you learn more about them. I think we’ve still got a lot to do. It’s how we communicate to the end investor, it’s the delivery of that.

Lawrence Lever: It’s not helped with scandals like Woodford and things like that.

John Ions: It’s not helped by scandals. You could argue, how much is helped by being-, we’ve got as much regulation as you could possibly put into an industry. Has it really improved trust? Has it got the outcome that you want to?

Lawrence Lever: It’s got rid of the worst villains.

John Ions: It’s got rid of the worst, but the depth of the FCA goes from payday lenders right up to the proprietary desk at an investment bank. So, I think one set of rules doesn’t fit all. Obviously, the more you prescribe, the more gaps you create. So, I think it’s got to be very much taken on board by the asset management companies. I think the quality of what we deliver, to be able to demonstrate that we do what we say on the tin, to be able to engage with our end clients is the most important thing because it’s a vital role going forward.

Ian Simm: We’ve had a decade of quantitative easing, which has produced a huge amount of liquidity in the market. In a way, it’s been easy to be in investment management for that time period because we’ve just been buoyed by this rising tide. That party is over. We going to have another decade or the next decade will be much more choppy, sidewards trending markets, much more peak-to-trough extremes. In that context, it’s going to be quite difficult to be a successful asset manager. Now the threat that we face in our industry is from robots. So passive investment, algorithmic trading and pressure from fiduciaries in our client base to reduce costs.

So, what we need to do on the active side of investment management is continue to earn our crust, to generate alpha relative to the returns from the benchmark. So, I’m going to do that through strong investment philosophy, strong culture, strong team, team cohesion, alignment of interests, etcetera. So, we’re going to have to work harder, but I think the wheat will separate from the chaff and those who are institutional quality have got scale, have got a track record and have got the vision for where money can be made over a five- to 10-year view so you can continue to generate alpha and that’s going to attract clients.

Lawrence Lever: And the others.

Ian Simm: Those are going to go out of business.

Lawrence Lever: I noticed that you’ve got £238m in a private asset fund. I wondered whether that’s also part of the future direction of this business. There’s a Boston Consultants report that says something like 15% of the assets of asset management are in alternatives, but 50% of their profits come from this 15%. So, I wonder whether those private assets and more broadly, infrastructure, alternatives are going to be a continued focus for asset management and for you at Impax. I don’t know about Liontrust, we’ll perhaps come on to that.

Ian Simm: I think it’s very logical that in a world that’s chasing returns, that money from pension funds and sovereign wealth funds and insurance companies is going into private markets, private equity type strategies. If you like, getting the illiquidity down payment for the prospect of much better risk-adjusted returns. So, in the context of our investment philosophy, there’s some great money to be made in the private markets area. We’ve been doing that successfully since 2005. We are expanding our fourth fund, which is the one you referred to and we expect to continue to grow that organically, while at the same time, looking around for teams or boutiques that might want to come onto our platform and bring us other capabilities in that space. So private assets with a focus on real assets or the development and management of real assets, rather than in venture capital or backing growth capital.

Lawrence Lever: Alternatives, private assets don’t feel like Liontrust to me.

John Ions: We have just shy of a billion I should think in hedge funds and liquid alternative vehicles. Some very successful strategies there. You can see by the weight of capital it’s chased returns through private equity. Like all asset classes, it has an important role to play, but ultimately, it’s about delivering and selling the products to the parts of the market that want it. We don’t seem to have learnt much about the property funds that we learned 10 or 12 years ago. Comes around and the system risk was supposed to have been dealt with the last time round. So, I think it’s very much about suitability. In those private assets, having limited liquidity, long-term investment horizon decisions, both important, but it’s knowing what part of the marketplace they’re being sold to and that part of the marketplace understands what they’re being sold. So, there’s a place for everything. To get the next generation of good businesses, people need to deploy and provide capital to those markets. So, it’s a valuable asset class, but–

Lawrence Lever: Are you looking for teams?

John Ions: We’re always looking at things and new ideas and teams, but we have a very clear framework to what we want to do. Is it an investment skill that we want? Is it a market that we know how to distribute into? Is it a market that we understand what the client requirements are? I think that helps us there, but with the Majedie acquisition, we’re broadening out more via institutional distribution and the institutional, longer-term, limited liquidity products, there’s very much a marketplace for. The retail environment, maybe very much at the super high net worth end, but it’s not really the parts of the market that we subscribe to.

Lawrence Lever: You’ve built really amazing businesses and it’s not been in a straight line. Are there one or two lessons that you’ve learnt that are helpful to articulate to others who might be thinking of doing the same?

John Ions: Don’t be afraid to make decisions and listen to the clever people in the room.

Lawrence Lever: And don’t care that they’re clever.

John Ions: Yes, exactly. My job is chief coach. I’ve got much more talented and intelligent people around me. My job is to make sure that as a unit, it’s not always the loudest voice in the room that’s heard, it’s the person that’s got the value and the insight into what we’re discussing.

Lawrence Lever: Don’t be indecisive, listen to the most intelligent voice in the room.

John Ions: Which is not necessarily the loudest.

Ian Simm: I think for me, it’s three things. Be super careful about getting the right people in the door and then, looking after them. Secondly, being imaginative and creative about doing deals with other people. That’s where our sub-management, sub-advisory relations, distribution partnerships we have. For example, Australia or Japan. Thirdly, it’s the old adage of just keeping on going. That’s what’s really seen us through some difficult times in the past and we’ll keep on going in the future.