This week’s update is inspired by one specific client meeting this week, plus more general conversations with clients since our landmark announcement on Monday that we have reached £500 million client assets under management.
What's Going On
Our clients range enormously in financial and investment sophistication, and as advisers we are very lucky to have Nick Gait, our investment director, at our disposal when the conversations turn technical! Whilst sartorially speaking it’s a bit hit and miss with Nick, one thing we advisers can rely on at short notice is his fabulously quick mind and thorough approach to his work.
So, when a client with a 40-year City career behind him asked me and Mihir, “assume I have been off the planet for two months, but I read Ben Graham’s Intelligent Investor whilst I was gone, bring me up to speed!”, we immediately called for Nick!
The conversation that followed between said client and Nick was a rare treat. Covering the investment snakes and ladders of 2025 so far, and which of our investment managers were doing well and not so well, it quickly becomes clear that Nick can recite the managers and co-managers of almost all our selected funds, plus the key points of his last meeting with them and summaries of their investment strategies – all without notes or preparation. Not just this, he also knows what has been going on in markets, as well as having digested the research of TS Lombard and picked out the salient points that impact Tideway’s portfolios.
It is this level of work and detail that gives us the conviction to first construct portfolios and then stick with managers, sometimes when things don’t come their way.
Here below are the results this year so far. The table shows the 25 funds we are currently invested in, each fund’s investment strategy, and its return for 2025 to date, ranked by return. We have added the S&P 500 index fund we used to hold, but which we sold earlier this year for context.
It is worth noting these returns are in pounds sterling, that not all the funds are in all the portfolios, and we are not invested evenly across each fund. We weight the investment to specific funds based on our convictions and our views on the risks implicit in each one, to ensure the right overall risk profile for each portfolio.
Source: FE Analytics, Total Return (GBP), 31/12/2024-18/09/2025
- The key takeaways from this table that Nick and the client discussed are:
Returns are mainly positive. The ‘up’ numbers are much bigger than the ‘down’ numbers, and the ‘down’ numbers are in funds we hold less of. It’s a good year so far. Of course, the client knew that from looking at his Tideway app – he came in with a smile on his face! - Fixed income returns are universally positive, with corporate bond funds significantly outperforming gilts and returns from the high yield managers hot on the heels of the equity managers.
- The weakening dollar has dented US equity investment returns. You can add about 8% to the US equity funds to see their returns for US Dollar investors.
- The majority of our active equity managers are outperforming the main US index. The global value managers are doing very well.
At the top of the table, Nick noted that the managers have been profiting from unloved sectors of the markets and businesses doing well in 2025, and they are very active in their management. It is also worth noting that we almost fired the Artemis Global Income team around 2020 after a period of dull returns, but Nick persuaded us to hang in there.
Who's Done Well?
The active managers have done well in defence companies, in some cases already banking profits and moving on. They have profited in financials whose business models are transformed by higher rates of interest, and some are following the AI supply chain.
Our emerging market managers shun the index which focuses on the BRICs, Brazil, Russia (we can’t invest there now anyway), India and China – they are investing elsewhere, in emerging Europe, South America outside Brazil and Asia (but not China). The South Korean equity market and the Greek market both got a mention in the top performing countries.
I knew the Greek market was up 60% in 2025, thanks mainly to the progress of its banks which have traded on just 1- or 2-times earnings and are rapidly modernising. We got hauled in by Piraeus Bank to do our KYC during the summer and earlier this year when our new Piraeus Visa charge card arrived at our London home, Ursula literally jumped with joy. Getting a new card from a Greek bank used to be a major undertaking spanning weeks and involving long hours in the bank shuffling papers. Fortunately, banking was not in and will never be in my remit!
The equity managers are looking at the prospects of the individual businesses and sectors, the quality of their management and, most importantly, considering the value of the business relative to the prospects. They are not afraid to take profits when big returns are made, and they are not just piling in to the biggest companies in the world and sitting in these holdings irrespective of these important investor issues.
The fixed income managers are even more active than the equity managers. They are doing their maths on yields to maturity and risk daily and taking advantage of any price anomalies they can find. They are constantly panning for little incremental gold nuggets, rather than flocking to the bonds of the companies that issue the most bonds (think about the logic of that for a moment!) and sitting there, whilst higher bond returns for the same risk are ignored.
Ahh, we all agreed, that is what active management is about – and in stark contrast to passive index tracking. Certainly, paying that little bit more in fees to these active managers in 2025 is paying off nicely.
“Is the tide turning, Nick, from flowing into passive funds and returning to active managers?”, the client asked.
“There is no evidence to suggest this has happened yet, but a lot of talk at fund managers as to what the impact might be if the tide did start to turn. We feel much safer not being in the crowded room if something does go wrong”, replied Nick.
On the issue of how much we do pay for these active managers, see below Nick’s note on our progress on third party costs in recent years. Without stealing his thunder, the headline is that the investment team’s efforts on reducing fund fees now translates into a saving of £1.15m a year for our clients, and there is more to come.
£500 million of Tideway Client Investments
£500 million of Tideway Client Investments
After a period of great returns and stronger new business, we were delighted to pass this milestone with last Saturday’s fund price update. The new business is mostly coming in from referrals – thank you!
As Nick shows below, the extra volume of money allows us to get better deals for you on third party fund fees which directly leads to improved returns. The bigger revenues also give Tideway a growing budget to spend on research and expertise in our investment team.
But the question on everybody’s lips has been: “What’s next?” The easy answer is “£1billion and beyond”. Since setting up the business, £1billion plus of client money has always been in my sights.
Delivering great service, advice, and investment returns, plus getting referrals both from clients and other private client advisers (mostly solicitors and accountants), is our core strategy to reach £1billion. However, there are signs we may get another tailwind.
The UK financial advice and wealth management sectors have been through a period of frenetic consolidation. Driven by a good dollop of greed from both private equity investors and business owners looking to cash in, the ‘buy and build’ consolidators have been spraying money around. Winning new clients and growing assets under management (AUM) based on your proposition alone is hard work. It’s doable (as we’ve proven!) but it takes time, a track record, and reputation to get momentum. If you are given a pile of cash through a sliver of equity and a big dollop of debt, and are prepared to pay silly money for businesses, growing AUM is easy and quick. That is not us.
The Consolidation Frenzy
Some of the consolidation was needed and a good thing, but some of it has undoubtedly gone too far. Earlier in the year, Citywire reported on their investigation highlighting £3.4billion of debt loaned to consolidators to buy advice and wealth businesses in the UK. With much higher debt servicing costs, some of these businesses are struggling to deliver the profits needed to justify the price. The result is that they are squeezing clients on fees and advisers on remuneration and support to try to improve margins. Furthermore, all of these businesses will need to be sold again to return private investor cash, which is typically looking for a 5-7 year turn around.
In the last few months, our recruiters have been sending us a growing list of good quality advisers with loyal customers looking to move away from firms where they are working for private equity-backed businesses under increasing stress. It’s clear this isn’t sustainable.
Anecdotally we hear:
- The adviser business model of the mighty St James’s Place is coming under strain, as younger advisers are expected to take out £1m or so of debt to buy the client banks of retiring advisers and are rightly getting nervous of being leveraged up with all that entails.
- Citywire more recently reported consolidator True Potential as having refinanced £750m of debt (the interest rate paid was not disclosed) and that the firm had set aside £100m in provisions for compensation to clients whose transfer to their (higher cost) platform may not have been in their best interests, notwithstanding the 8% upfront fee paid to advisers encouraging (the firm have maintained it was not advice!) clients to transfer.
- And recently in the news: the Primera-backed Evelyn Partners’ £64bn of AUM is up for sale to the highest bidder. With relatively few potential buyers, it appears that NatWest is the frontrunner. This must be sobering for the clients and staff who joined the likes of Tilney, Smith and Williamson, Best Invest, and hosts of other smaller firms swallowed up by Evelyn (including Dart Capital, the management buyout firm of my first business).
We are delighted to be well clear of this merry-go-round of stress and are very happy to push on independently, without leverage, and to take advantage of the fallout of the consolidation frenzy which must surely come.
Tideway Fund Selection Process: Cutting Costs, Keeping Quality
Over recent communications, we have shared our broader investment strategy and highlighted some of the opportunities our managers are currently finding in the markets.
In this update, we take a step back to recap how we select funds for your portfolio. Importantly, our approach is not about simply chasing the best recent performers – a tactic that has consistently been shown to destroy value over time. Instead, we focus on a disciplined process, and today we look more closely at one important part of that process.
Team & Resources
The key is not the size of the team, but its quality and stability. We look for managers with the right experience and aptitude, supported by a culture that helps retain talent over the long term.
Most importantly, we seek evidence that the interests of our managers and our clients are aligned – for example, it’s encouraging to us when managers invest significant amounts of their own capital in the funds they run or in the investment management business itself.
Capacity
As funds grow, they can become too large to implement their original strategy effectively. This can erode performance. Warren Buffett captured this well when he said:
“The highest rates of return I’ve ever achieved were in the 1950s… but I was investing peanuts then. It’s a huge structural advantage not to have a lot of money.”
We monitor fund size closely to make sure strategies remain scalable.
Liquidity
All funds we invest in offer daily dealing, so clients can access their money whenever they need it. The collapse of Woodford Investment Management was a stark reminder of the risks when liquidity is overlooked.
Investment Philosophy & Process
We focus on managers with a clear, evidence-based philosophy and a disciplined process that they apply consistently through different market conditions.
Fundamentals & Valuations
The price you pay matters. Just as you wouldn’t buy a car without checking the price, we won’t buy into strategies without checking what we’re paying. With valuations near record highs, this discipline is even more important. We also look beyond price to the strength of company earnings and the quality of those earnings to judge what’s worth owning.
Performance
Past performance on its own is never a good reason to invest. Instead, we analyse performance in detail to understand what really drove returns and whether it can be repeated. For example, is it likely that Nvidia, a company with market cap of over $4trillion will repeat its performance of the last ten years?
Operational & Risk Management
We look for managers with the right infrastructure, systems, and controls to minimise operational risks and allow the investment team to focus on their work.
Fees
Of all the variables in investing, cost is one of the most certain. We ensure that fees are fair, transparent, and justified by the value a manager can add.
We are pleased to report that, over the five and a half years since Tideway moved its in-house investment strategies to external managers, the fees being paid to fund managers have decreased significantly. This has been achieved through several methods:
- Growth in assets under management: Smaller strategies, such as Titan Hybrid Capital, have benefitted from increased scale, with additional assets helping to reduce the impact of fixed costs.
- Recognition for long-term partnerships: Managers have rewarded us with lower fees in recognition of our meaningful, long-term commitments to their strategies. Importantly, these reductions were offered rather than requested.
- Founder share classes: We have secured access to favourable fee terms with leading fund managers by supporting newly launched strategies through their “founder” share classes. In every case, these managers attracted new capital quickly and closed the offer, meaning our clients continue to benefit from preferential terms no longer available to new investors.
All in all, we have invested roughly £160m of client money across seven funds at rates not widely available.
Fixed Income Portfolios
Source: Tideway, FE Analytics June 2025
Although significant savings have been achieved, we believe that in fixed income, price is what you pay, but value is what you get. Passive investing in bonds may appear slightly cheaper (though the fee difference is far smaller than between active and passive equity). However, passive bond investing comes with two major drawbacks:
- First, fixed income markets are less efficient than equity markets, which provides skilled managers with more opportunities to deliver consistent outperformance.
- Second, passive bond indexes are fundamentally flawed: they give the greatest weight to the companies with the largest amount of debt, regardless of quality.
In other words, the more debt a company takes on, the more of your money a passive fund will lend them. We think that’s the wrong starting point for building a resilient fixed income portfolio.
Equity Portfolios
Source: Tideway, FE Analytics June 2025
On the equity side, the fee savings appear smaller because we have moved from a portfolio that included some low-cost passive funds (around 10% of the portfolio) to one that is now fully active (as of March/April this year). As explained in previous updates, we made this shift due to concerns about valuations and concentration risks in the world’s largest market, the USA. We have covered these topics in detail recently.
Multi-Asset Portfolios Contains both Fixed Income and Equity Funds
Source: Tideway, FE Analytics June 2025
As we highlighted when discussing our wider fund selection process, fees are an important factor, but they are never the only factor. Choosing funds on fees alone would, for example, have meant selling our best-performing strategy, Artemis Global Income, which has been a top contributor year-to-date as well as over the last three and five years.
Similarly, if we believe the quality of any of our investment strategies has diminished, we will not hesitate to replace it, even with the reduced fees.
In total, we estimate that our clients today are paying £1.15 million less in fund manager fees than they would have done in April 2020. We will continue to work hard on your behalf, securing the best possible terms without compromising on quality.
