Kevin Aitchison and Ian Whittock seem quite at relaxed at the Baker Street offices of their new home, Knight Frank.
Partly this could be because the pair are still fresh from the three months of gardening leave they both took following their resignations from ING Real Estate Investment Management in December in the wake of its €1bn takeover by CBRE Investors.
But in part it is the default setting for Aitchison and his Welsh colleague, who describes them both as “down to earth”. This is not to say they are not serious operators in the UK fund management industry, and serious about the task of building up Knight Frank’s fledgling investment management arm.
Between them the duo have more than 50 years of experience in the UK property market. Both joined ING REIM’s predecessor, Baring Houston and Saunders, which was bought by the Dutch bank for £1 in 1995.
It was during their final three years at ING that they became “quite close” [Aitchison: “Be careful how you write that”].
In October 2008, Aitchison had just moved from his role overseeing the UK’s segregated account and joint venture business to replace UK head Robert Houston. He drafted Whittock in from European research to become UK chief investment officer.
The background was grim. Overgeared fund managers had suffered catastrophic drops in property values, which, in turn, affected loan-to-value ratios. The world’s largest fund manager was no exception. The business was being restructured and Aitchison spent a year de-gearing and de-risking.
So what do the pair have in store for Knight Frank Investors, which emerged in 2010 after the property agent’s previous fund management arm, Rutley Capital Partners, was hit by the downturn (see box)?
Aitchison says that the aim is to have a suite of niche, closed-ended funds targeting such areas as residential or agriculture, “the sort of product we could not even contemplate at ING”, alongside more traditional vehicles – City offices, for example.
Aitchison says: “One of the challenges for us is that the UK is a really crowded marketplace. It’s about trying to find opportunities to deliver something different. One of the big things for us will be to leverage off the Knight Frank expertise.”
Whittock adds: “The understanding of markets here is very, very good. What we bring is an understanding of the investment process.”
On the service side, there will be three arms: UK local authority and corporate segregated accounts; high-net-worth individuals, and services for overseas clients.
Unlike Rutley Capital Partners, which was higher up the risk curve with highly geared products, KFI is going to concentrate on core funds.
The duo make reference to alignment between fund managers and investors, reinforced by management co-investment and credibility.
Whittock explains: “We want to launch products that do the job for the client – that is the first point. It’s not just about building AUM, it’s about having some integrity.”
The goal instead is client service and profitability. In its most recent accounts for the year ended 31 March 2011, Knight Frank Investors LLP posted a profit of £238,000 on turnover of £850,000.
There seems to be no doubt among their peers that the “well-trusted client relationship manager” Aitchison and the “top-quartile strategic thinker” Whittock have the skills for the job. However, it will not be without challenges. One source pointed out that, like any other property services firm with a fund management arm, convincing the market that there are Chinese walls between the businesses can take some doing. As can demonstrating track record when trying to grow business.
The pair are working on a three-year business plan to establish the structure of and support for the business over the next 10 to 15 years. This includes the investment process and governance and getting on an approved list of consultants, which in itself can take two years.
So what prompted the move from the world’s largest fund manager, with €64bn AUM – including around £6bn in the UK alone – to the fledgling KFI, which has around £680m AUM?
“CBRE Global Investors is now very big. We wouldn’t have been directly running the business. Rather, we would have been part of management. Or do you want to join a fantastic brand and try to do your own thing? To me, that’s quite an exciting opportunity,” Aitchison says.
Whittock agrees and adds: “I personally never felt able to take the risk before, but then I thought, ‘It’s now or never’. It’s a completely different mode of operation and that is why we are here.”
Aitchison stresses that their decisions to leave were mutually exclusive, and they both looked at independent opportunities before the attraction of the brand and the equity partnership on offer at the 116-year-old firm won them over.
They praise the professionalism and commercial savvy of their new colleagues, both in the six-strong investment management division previously run by John Styles, and across the whole of Knight Frank.
Being free from the shackles of bureaucracy that are part and parcel of an organisation the size of CBREGI undoubtedly played its part in the decision to move on, given the references made to “short lines of communication, quick decision making and being fleet of foot” at their new home.
The move also gives the duo the chance to “make their mark”. They seem to be aware of the opportunities and the challenges facing them.
Whittock says: “I am glad there are two of us because there is a lot of work to do. It would be overwhelming if it was just one of us.”
