Gresham House PLC’s sustainable investment focus offers plenty more room to grow

Just over six years ago () was a sub-£15mln investment trust on the verge of liquidating itself.

Instead, a team led by chief executive Tony Dalwood, the former boss of ’ global private equity arm, and chairman Anthony Townsend, former chair of the Association of Investment Companies (AIC), launched a management buyout with the aim of transforming it into an asset management business.

Today, Gresham House has a market valuation of around £250mln and £4bn of assets under management, after asset growth of 42% over the past year.

The expansion has been driven by canny acquisitions and strong organic growth with a focus on environmental and socially responsible investments.

With client demand for these specialist areas of investment growing ever stronger and a management team that remains hungry, there is plenty of room for further organic and acquisitive growth.

For investors, asset managers can be attractive businesses. As the cost base is fairly fixed, growing assets should lead to bumper profits, with strong levels of cash that can either be spent on acquisitions or returned to shareholders.

Gresham House is keen to do both.

For 2020 the dividend was hiked 33% and “ambitious” is Dalwood’s emphatic one-word answer to describe the company’s acquisition aspirations.

“I could embellish but I’ll just say we are an ambitious company – and  we want people to be proud of being part of what we are doing, so that they know that they’re not just part of a machine but something that is making a difference.”

Two purchases were agreed in the past year, the most recent being Appian, an Ireland-based active asset manager with roughly €330mln of assets centred around funds investing in equities, property, infrastructure and forestry. Once completed this €4.55mln deal will give the group access to the European Union. This followed last March’s £7mln acquisition of TradeRisks, a specialist housing fund manager and provider of debt structuring and advisory services to the housing and social infrastructure sectors, which also brought a mandate to manage the Residential Secure Income PLC (LON:RESI) investment trust.

The year before that was spent integrating another pair of additions: Livingbridge VC, the UK-based manager of the Baronsmead venture capital trusts (VCTs) and two open-ended funds, which was picked up for £30mln potentially rising to £40mln; and FIM, a specialist in UK real assets, specifically sustainable forestry and renewable energy investments, which was bought for up to £25mln.

Dalwood is keen to keep growing the business organically too, with the headcount growing by 20% excluding acquisitions in each of the last two years.

This is to support an ever-growing range of fund products.

Building on the step-up in housing provided by the TradeRisks addition, the company is about to launch a shared ownership limited partnership fund in the next couple of months.

A UK forestry growth fund and a platform for forestry carbon credits are both in the pipeline too, using expertise in a space where the company has a 40-year track record, as well as a second British Sustainable Infrastructure Fund and a new private renewables fund.

These new funds will grow assets at different rates, depending on the areas.

“Our Sustainable Infrastructure fund, for example, has got a lot of momentum,” Dalwood explains. “Compared to when we’re launching a new renewables fund and/or a shared-ownership housing funds, these are new so you’ve got to build that momentum so they will take a longer time to build.”

During 2020, what was a tough year for most industries to survive, let alone pursue new avenues of growth, the AIM-listed company did not stand still.

Expansion was spread across asset classes, with the strategic equity team, which manages the Gresham House Strategic investment trust, growing public equity assets 80% to £508mln to more than offset a 3% dip for private equity to…