A new star on the horizon

Jeff Prestridge, personal finance editor of the Financial Mail on Sunday, takes a look at Neptune – a company that could be on the verge of taking centre stage in the galaxy of investment firms that includes the likes of New Star and Jupiter

Mercury has been conquered by the Americans; Jupiter continues to prosper despite its German owners; and New Star shines ever brightly. Welcome to the galaxy that is retail fund investment.

Yet a new planet is emerging in the telescopic sights of investment watchers to orbit in the same galaxy occupied by Merrill Lynch (Mercury as was), Jupiter Asset Management (still owned by Commerzbank) and New Star Asset Management. Step forward Neptune Investment Management.

Although Neptune has only been around for a shade over three years and has no more than £400m of funds under its belt, it's slowly gaining a reputation for being one of the investment industry's smartest boutique managers, sitting alongside the likes of Findlay Park, Thames River Capital, JO Hambro and Odey Asset Management.

Partly as a result of small fund acquisitions along the way and partly as a result of some strong investment performance numbers, Neptune is beginning to make waves and appear on the radar screens of some of the country's top independent financial experts.

Neptune may be a tightly-knit team of 20 with eight fund managers at its core but its true heart is 47-year-old founder Robin Geffen, a fund manager of more than 25 years' standing, who has run money in the Far East, Eastern Europe and the UK. In short, Neptune Investment Management is Robin Geffen. Take Geffen out of the equation and Neptune is little more than an investment pimple in a world of investment mountains.

Geffen learnt his investment trade under the tutorship of legendary City player Jacob Rothschild, now Lord Rothschild, in the 1980s, working alongside such distinguished fund managers as Nils Taube and John Hodson. These skills were then honed with spells on the international desk at what became Threadneedle Asset Management, and then pensions manager London & York, life insurer Scottish Equitable and American fund manager Orbitex.

It was while at Orbitex that Geffen finally decided to go solo. "I joined Orbitex in 1997 and set up its global equity office," he says. "We launched a few funds but when the dot.com bubble burst in early 2001, Orbitex decided to retreat to the US. As part of my leaving settlement, I was able to take the four Orbitex funds with me." Neptune Investment Management was born in May 2002.

Why Neptune? "I didn't want the new investment company to be called Geffen Investment Management." he replies. "I wanted a name that had gravitas and which people were familiar with. I had also always been fascinated with Neptune, Roman god of the sea – the equivalent of the Greek Poseidon – and if the investment industry could maintain the likes of Jupiter and New Star, why not a Neptune?"

Launching the company was not easy, especially after the fallout from the dot.com bubble. Neptune had in effect the management charge of the four Orbitex funds – Global Equity, Managed, UK Equity and Balanced – to exist off. Between them, the funds had tiny assets of between £25m and £30m.

Not surprisingly, Geffen decided to keep things lean and mean. Five employees were brought over from Orbitex to join him and one floor of office space was rented in Hammersmith, at a third of the cost of Orbitex's offices in London's Covent Garden.

To begin with, the fund management team comprised Geffen and Greg Bennett. But slowly but surely, as funds under management have built up and new funds have been launched or acquired, the team has been expanded although Neptune still only occupies one floor of its Hammersmith premises.

Today, the fund management team is eight strong with Rob Burnett heading up Europe, Chris Taylor in charge of Japan, Felix Wintle responsible for the US and Derek Bartlett in charge of bonds. Greg Bennett heads up the UK desk with Geffen overseeing the fund management team as chief investment officer.

On the funds front, the original four trusts have been joined by nine others, including traditional income and geographic funds – European Opportunities, Japan Opportunities and US Opportunities – and more eclectic funds investing in Russia, China and health stocks.

"We keep on growing," says Geffen. "It's a mixture of organic growth – as illustrated by our Income fund which a year ago was valued at £25m but today is heading for £150m – and it's also a reflection of a number of small fund management acquisitions we've made including those from City Financial, Quilter and Carr Sheppards Crosthwaite."

So, why has Neptune been so successful in such a short space of time? There are a number of reasons. First, nearly 80% of Neptune is owned by employees, which means everyone at the company is focused on growing the business. "Equity participation is a key element in growing the team," says Geffen, who remains a majority shareholder in the business. "It helps attract good people."

Second, there is no doubt Neptune's performance numbers have been mightily impressive as the table below shows. If truth be told, there is not a bad fund there, with Managed, European Opportunities, Global Equity and Japan Opportunities showing particularly strong relative performance over the past one, two and, where the funds have been running long enough, three years. As a result, despite their relative youth, some of these funds – not all by any stretch of the imagination – are now being recommended by leading financial advisers as we highlight overleaf.

Third, Neptune seems to be underpinned by a well-defined investment process that so far has served it well. This is something Geffen is keen to emphasise. "Process is the star at Neptune," he says. "It's not about individual fund managers." The firm's investment philosophy is based on the view the investment world should be looked at in terms of global sectors – where a company is based is almost an accident of history. As a result, each member of the fund management team is responsible for at least one global sector.

"It's a good way of looking at the investment world," says Geffen. "Everyone contributes to the investment process, having fund management and analyst responsibilities. Each manager contributes global views. The idea is to identify the turning points in each key global sector, which in turn can have an enormous impact on the portfolios we manage and the investment performance we generate."

Finally, Neptune has been successful because it is so nimble. There is no bureaucracy built into the investment decision-making. Each fund is run by one manager and one back-up, which allows for investment decisions to be taken quickly. "In rugby parlance, we do our talking on the pitch," says Geffen. "Essentially, what Neptune is about is delivering strong investment performance through global sector analysis. So far we've achieved it."

Yet for all its nimbleness, clear investment process and stellar performance, Neptune has its fair share of detractors. Some financial advisers believe Neptune's current crop of funds does not have a sufficient track record or critical mass to be taken too seriously. "The group has no brand, no pedigree, no known financial strength and no outstanding funds," says Brian Dennehy of Dennehy, Weller & Co, one of Neptune's sternest critics.

Others are more concerned about Neptune's dependence on Geffen. Although Geffen has reined back on his investment responsibilities, handing over the UK Equity fund in April to his colleague Greg Bennett, he is still chief investment officer, main manager on five Neptune funds, assistant on three others and co-manager on one more.

"The key strength of Neptune is undoubtedly Robin Geffen," says Tony Lanning of Origen. "He's an extremely impressive, clear-thinking fund manager who can demonstrate a strong and consistent investment track record. Yet a major concern is that Neptune's success appears solely dependent on him."

Of course, this criticism doesn't wash with Geffen. He argues that Neptune is less reliant on his fund management talents than ever before. "If I disappear under a bus tomorrow, there is back-up on all the funds I run," he says. "I've assembled the largest fund management team I've ever had here, investment performance is humming and individuals such as Greg Bennett are beginning to make a name for themselves."

Indeed, Geffen points to the recent departure of former European Opportunities manager Barry Norris as evidence of the fact Neptune has become more than Robin Geffen. "Norris was home-grown investment management," he says. "He did not manage money until he came to me. I take it as a tribute to what we are doing at Neptune that he has moved on to Britannic to manage the Argonaut European Alpha fund."

Going forward, Neptune wants to build funds under management to between £10bn and £12bn with a team of no more than 50. In light of Neptune's current size, this seems a tall order but Geffen, who regularly works six-day weeks, is nothing but determined. He sees growth coming organically and also through acquisitions. "We're fishing for buying opportunities where funds under management are between £50m and £200m," he adds. "It's an area where there are not many other anglers. We're optimistic of further purchases."

The future for Neptune Investment Management seems bright. Provided Geffen stays healthy and maintains his obvious enthusiasm for fund management, Neptune should only go from strength to strength. That should be good news for those investors who have been – or are in the process of being – brave enough to give one of Neptune's embryonic investment funds a chance.