Dowgate Wealth UK Best Ideas
The Dowgate Wealth UK Best Ideas Investment Portfolio is a discretionary service designed to give experienced private investors exposure to the UK small and mid-cap market, in particular placings and IPOs, many of which are normally only available to institutional investors.
The service aims to produce index-beating returns – not guaranteed.
The portfolio will include Dowgate Wealth’s favoured longer-term holdings, combined with investments into upcoming initial public offerings and placings that fit with the investment strategy.
The portfolio is expected to have a bias towards high-growth companies with a market capitalisation of less than £2 billion.
The service is managed by a highly experienced investment team, the majority of which has been working together for years whilst at Hargreave Hale, the renowned UK smaller company investor. Mark Chadwick heads the team – for 26 years he worked closely with Giles Hargreave, former manager of many of the highly regarded Marlborough unit trusts, first at Hargreave Hale, then Canaccord Genuity. Since starting Dowgate Wealth, in December 2020, the team has attracted over £400 million from high net worth investors.
The deadline for the first close is 15 December 2021. Dowgate Wealth aims to deploy investors capital into a portfolio of 15-20 companies over a period of three months after each close – not guaranteed.
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- Focus on small and medium-sized UK growth companies
- Access to IPOs and placings normally only available to institutional investors
- Focus on company management teams with skin in the game
- Experienced investment team
- Minimum investment £50,000 – you can apply online
Why consider investing in IPOs and placings?
Outside the US and China, the UK was the most active IPO market globally in the first nine months of 2021.
So far, 86 companies have raised £13.7 billion via initial public offerings, the most since 2014. A further £26 billion has been raised through placings.
Some notable IPOs in 2021 include Darktrace, the leading cyber security business, Trustpilot, the online reviews service, and Wise, the international money transfers business.
Of the 86 IPOs this year, the average performance to 30 September 2021 has been an increase of 25%. Note past performance is not a guide to the future.
Almost half (43%) of all IPO funding raised was for technology or consumer internet businesses, and 20 of these businesses were founder-led.
The UK IPO market is proving a fertile hunting ground for investors to find new ideas for their portfolios, whilst share placings offer the opportunity to acquire additional shares in existing investments, often at a discount to the current market price.
However, many of the City’s most promising IPOs and placings are normally reserved only for institutional investors, whilst retail investors are usually shut out. There are, of course, no guarantees of success. Investing in such companies is by nature risky – you could lose all your capital.
Dowgate Capital is an investment banking and asset management business founded in 1990. It offers a range of services, including corporate broking & advisory, research, sales & trading, equity solutions and asset management.
In 2019, Dowgate Capital established Dowgate Wealth – a wealth and fund management boutique founded on the belief that there remains a place for a more bespoke and opportunistic stock-picking approach within wealth management.
A series of senior appointments followed, including the appointment of Mark Chadwick from Canaccord Genuity, formerly Hargreave Hale. Mark spent 26 years at the firm, working alongside Giles Hargreave, previously fund manager of the Marlborough Special Situations fund, as part of the Hargreave Hale UK smaller company investment team. Mark is joined at Dowgate Wealth by six former Hargreave Hale investment team colleagues. Clients can expect a high conviction approach, access to initial public offerings and placings and personalised service.
Dowgate Wealth is an employee-owned subsidiary of Dowgate Capital. Six senior members of the investment team own a material stake in the business.
The Dowgate Wealth team currently consists of 14 individuals with over 260 years of experience between them. This includes three senior executives from Dowgate Capital, four investment directors, one fund manager, one investment manager, one head of dealing, and four support staff.
Meet the manager: watch a video interview with Mark Chadwick of Dowgate Wealth:
Dowgate Wealth believes in buying and holding great businesses for the long term.
One of Dowgate’s core investment principles is to invest alongside committed and passionate founder-led management teams with significant amounts of their own capital at risk. They believe this can produce superior returns for shareholders. An example is S4 Capital, detailed below.
Key to the investment process is meeting management teams to understand what motivates them, their experience, track record, and treatment of minority shareholders. Dowgate conducts 15-20 company meetings each week.
Dowgate looks to invest in structural growth themes and to understand the impact of longer-term trends – such as networked knowledge, deep learning AI, green energy, robotics and autonomous transport, DNA sequencing, and frictionless finance – on the longer-term prospects of each business it considers.
Investors can expect their capital to be deployed into a portfolio of 15-20 small and medium-sized UK quoted companies over a period of three months following the fund close.
The portfolio is expected to have a bias towards businesses with market capitalisations of less than £2 billion and to be a blend of the managers’ favoured longer-term holdings, combined with placing and IPO opportunities that arise at the time of investment.
In the first nine months of 2021, Dowgate Wealth has participated in 47 IPOs and placings, 33 of which were profitable as at 30 September 2021, with an average return of 33.8%. The remainder showed an average return of -18.67%.
A sample portfolio the managers believe to be representative of the service is shown below. Within the sample portfolio, the average market capitalisation is £1.1 billion and no single sector accounts for more than 20% of the total (September 2021).
Market capitalisation breakdown
Examples of portfolio companies
Below are previous investments. They are outlined to give a flavour of the types of companies you might expect but they may not be part of a new investor's portfolio.
S4 Capital – IPO and placing investment
S4 Capital is a digital marketing and advertising agency founded in May 2018 by Sir Martin Sorrell, the former CEO and founder of WPP. Sir Martin spent 33 years at WPP, turning it from a £1 million cash-shell in 1985 to the world's largest advertising and PR group with a market capitalisation of over £16 billion when he left in April 2018.
S4 Capital is seeking to build a purely digital global advertising and marketing services business. The group continues to expand rapidly as it deploys its “buy and build” investment strategy, acquiring and integrating leading advertising agencies into three practice areas: Content, Data & digital media, and Technology Services.
S4 Capital now has over 6,900 people in 33 countries across the Americas, Europe, the Middle East and Africa and Asia-Pacific and a current market capitalisation of approximately £4.0 billion. In its most recent update, the company reported year to date revenue of £457.7 million – a 101% increase on the previous year.
The Dowgate Wealth team first invested in the business via its initial public offering in September 2018, whilst still serving at Canaccord Genuity. The team has continued to support the business through subsequent share placings.
Alpha FX – IPO investment
Alpha FX develops strategies and technologies to help corporates and institutions manage and hedge their currency more effectively. The business has two divisions: FX Risk Management, which supports businesses that trade currency for commercial purposes, and Alternative Banking, which provides payment, collection and account services. It targets small and medium-sized companies that are typically too small to employ their own treasury departments. The business currently works with over 800 organisations in more than 30 countries.
Dowgate believes the corporate culture within Alpha FX has been critical to its success. The founder and CEO, Morgan Tilbrook, owns 15% of the business and approximately 50% of Alpha FX staff either have, or are working towards, an equity stake in the business.
The Dowgate team first invested in Alpha FX at its IPO in April 2017, whilst still serving at Hargreave Hale. Alpha FX raised £30 million at a market capitalisation of £65 million. The team has since backed the business in a number of subsequent share placings and remains a committed long-term investor.
Alpha FX has a market capitalisation of £900 million (September 2021). In 2020, the group generated revenues of £46.2 million, up from £35.4 million in 2019. In the first six months of 2021, the business grew its revenues by 90% to £34.2 million. This was largely driven by the Alternative Banking division, which saw revenues jump 600% to £9.5 million. Past performance is not a guide to the future.
AdvancedAdvT – Recent investment
AdvancedAdvT Limited is an acquisition vehicle listed on the standard segment of the London Stock Exchange – the third to be set up by ‘software queen’ Vin Murria OBE.
The first, Computer Software Group Plc, an IT software consolidator, was established in 2002 and subsequently sold to a US private equity firm in 2007 for £500 million. The second, Advanced Computer Software Group Plc, was a healthcare, business and learning management software provider. Over the course of her seven years as CEO, Vin Murria grew the business from an initial £12 million acquisition to 2,000 employees and over £200 million in revenue. The business was sold in 2015 to a private equity firm for £750 million.
AdvancedAdvT is seeking to acquire a cash generative software business that can demonstrate high recurring revenue, a sticky customer base, and benefits from high barriers to entry.
The company raised £130 million in March 2021 with the support of leading institutional investors, including Dowgate Wealth.
Best of the Best – Failure example
As is to be expected, not all investments work out. One recent example is Best of the Best Plc.
Best of the Best Plc is an AIM-quoted operator of competitions that give customers the chance to win a luxury car. Historically these competitions were marketed within retail settings, such as shopping malls and airport terminals, but today 100% of the businesses revenues are generated online.
In April 2021, the Dowgate team participated in a secondary share placing in which the directors of the business sold the equivalent of 26.6% of the company’s issued share capital. In June 2021, the business issued a profit warning on weaker than expected revenues due to changing consumer spending habits following the ending of lockdown, and rising customer acquisition costs. The business warned its FY 2022 results are expected to be 62% lower than previous guidance.
The Dowgate team began selling its position on the day of the profit warning at £20 per share and was fully out of the position by the time it reached £15 per share.
This is a new service. There is no performance track record.
Access to your investment
Investments in this portfolio are for the long term, however, you can request to withdraw your funds from the Dowgate UK Best Ideas Investment Portfolio at any time, subject to market liquidity.
There are no tax reliefs associated with this investment. The portfolio is not available within an ISA. Remember, tax rules can change and tax benefits depend on your circumstances.
Risks – important
This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice.
The service will seek to build a portfolio of small to medium-sized UK quoted companies. The portfolio is high-risk so should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks.
Shares of small and medium-sized quoted companies can be hard to sell, illiquid, and can be very volatile especially if the market falls sharply. The difference between the buying and selling price of listed shares can be wider than the spread one might expect for larger main market stocks.
A summary of the main charges and savings is shown below. The investment may have additional charges and expenses: please see the provider documents for more details. If you would like a full breakdown or a personal illustration, please let us know.
|Full initial charge||0%|
|Wealth Club initial saving||—|
|Net initial charge through Wealth Club||—||Annual management charge||1.25%|
|Dealing charge||£20 per trade|
Example of the charges over five years
It is well documented that private investors are often unable to invest in the most compelling company flotations and share placings, with institutional investors often being given favourable – if not exclusive – access.
Dowgate seeks to address this problem by providing experienced investors with access to UK IPOs and placings, via a professionally managed discretionary investment service.
Investors can expect to gain exposure to a “best ideas” portfolio of 15-20 holdings, made up of Dowgate Wealth’s favoured long term holdings, combined with IPO and placing opportunities that meet Dowgate’s investment criteria.
The team is an active participant in the IPO and placing market, having participated in 47 such deals in the first nine months of 2021 alone.
Whilst Dowgate Wealth is a newly established wealth management business, the investment team has several decades of experience working within one of the UK’s top UK smaller company investment houses, and the team owns a material stake in the new venture, which should help align their interest with those of investors and ensure a long-term commitment from the team.
Register your interest – no obligation
See five-year performance of shares mentioned
Read important documents and apply
Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.
- Discretionary portfolio
- Asset exposure
- Main market, AIM, IPOs, placings
- Net initial charge
- Annual Management charge
- Minimum investment
- First close deadline
- 15 December 2021