Ex-Schroders personnel transform former zombie into sustainability and ESG leader

Ian Orton, 28/06/2022

Gresham House has come a long way from when it occupied the office suite immediately adjacent to the one occupied by PAM Insight, the publisher of fundtruffle and thewealthnet.

Then, shortly after assuming its current identity in December 2014, it amounted to little more than a shell company with net assets of £27.84 million and a market capitalisation of less than £15 million.

Now it has net assets and a market capitalisation of around $148.48 million and £350 million respectively, and has just reported total income and pre-tax profits for the year to 31 December 2021 of £70.36 million and £12.21 million. It also has client assets under management (AUM) of £6.54 billion and has moved into much bigger premises.

In the process it claims to have acquired leading positions in a number of sub-sectors of the UK asset market management industry, not least venture capital trusts (VCTs), forestry and new energy battery storage as well as developing a growing presence in a number of other segments, such as solar and wind energy, sustainable infrastructure and social housing.

It also caters to a diverse customer base including family offices and rich private individuals along with retail and institutional investors primarily through the provision of a wide range of pooled investment vehicles and strategies.

The metamorphosis from a neo-shell company to a successful investment boutique with a distinct bias towards sustainable and ESG investing is probably due to the efforts of Tony Dalwood, Greshan House’s current chief executive.

Mr Dalwood, who established and grew SVG Investment Managers between 2000 and 2011 before taking the lead at SVG Advisors (the former Schroder Ventures), orchestrated a management buy-in at Gresham House in late 2014.

Although it can trace its inception back to 1857 and had a full London-listing, by 2014 Gresham House amounted to no more than a very small and loss making investment trust, or closed-ended investment company.

On completing the buy-in and raising new capital Mr Dalwood assembled a new management team.

These included Graham Bird, a former colleague of Mr Dalwood’s at SVG, who became head of strategic investments and Rupert Robinson.

Mr Robinson, a former chief executive and chief investment officer of Schroders (UK) Private Bank, became head of Gresham House Asset Management in September 2015.

Since adopting its new guise and changing its listing to the AIM segment of the London Stock Exchange (LSE), Gresham House has focused its activities on two broad areas: strategic equity and real assets.

The former has a private equity and small firm bias and includes venture capital trusts (VCTs); a small family of open-ended funds such as the Gresham House UK Micro Cap Fund, the Gresham House UK Smaller Companies Fund and the LF Gresham House UK Multi-Cap Income Fund; and Strategic Equity Capital plc, a London-listed investment company that employs private equity techniques to manage public equity.

At the end of 2021, strategic equity accounted for £1.92 billion of AUM, of which public equity accounted for £1.04 billion and private equity £887.0 million.

Gresham House’s real asset management-related activities have a distinct ESG and sustainability focus.

It claims to be the UK’s largest manager of forestry resources and has recently raised just over £202 million for Gresham House Forest Growth and Sustainability LLP to augment these activities. The firm hopes to expand its forestry footprint further by launching a dedicated international forestry fund later in 2022.

Gresham House also claims UK primacy in new energy battery storage and manages the Gresham House Energy Storage Fund plc, a London-listed closed-ended investment company with around £450 million of assets.

The firm is also active in the management of UK wind farms and solar parks.

Sustainable Infrastructure and real estate are two other areas of focus and it manages a number of pooled vehicles that invest in these asset classes.

In total real assets accounted for £4.81 billion of AUM at the end of 2021. Forestry contributed £2.95 billion, new energy and sustainable infrastructure £1.21 billion and real estate £448.0 million.

Going forward Gresham House has ambitious growth plans.

In 2020 it announced a five-year plan that aimed to double assets to £6.0 billion; realise an operating margin of 40 percent and generate a return on capital expenditure (ROCE) of 15 percent or more.

Progress has been so rapid, however, that it has revised these targets to £8.0 billion in terms of AUM and a ROCE of 20 percent.

Gresham House has made a number of acquisitions to fuel its growth ambitions.

Over the past year it acquired Appian Asset Management Ltd., an Irish asset management that has a sustainability focus that brought another £350 million of AUM; Moebius Equity Partner plc, a UK technology and VCT specialist, that brought around £390 million of new assets; and Traderisks Ltd, another fund manager and specialist provider of debt strategy and advisory services to the housing and social infrastructure sector.

Acquisitions have made a significant contribution to Gresham House’s growth since 2014.

Unlike many firms in the sector, however, these have been financed by equity rather than debt. In addition to £40.25 million of cash Gresham House has no debt on its balance sheet.

This may be a more sustainable long-term strategy especially if interest rates increase significantly.

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