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Featured Profile: Nick Hamilton
Home and away
As Challenger's chief executive of funds management, Nick Hamilton is responsible for the $91 billion business that generates about 25% of the company's net profits - but it hasn't always been smooth sailing. Kanika Sood writes.

Challenger is usually referred to as an "annuities giant".

But it also has a fast-growing funds management business, led by a not often-quoted executive Nick Hamilton. The business ended 2020 with about $91 billion in total assets and a net income of $81 million in the December half.

I would not change anything about the decision I made at that time.
Hamilton has headed the division since October 2019 and arrived at the role after a varied - and at times controversial - career in funds management.

The son of a pilot and a flight attendant, Hamilton is the middle child, sandwiched between two brothers.

"We had two choices of holiday. It was a very suburban backyard in Brisbane, which was my grandfather's house. Or it was going off to very exotic locations in the world because you used to get cheap airfares," he says.

"We spent a lot of time in India [and] Malaysia - had to be cheap places."

On finishing at Sydney's Shore School, he had ambitions to train as an architect. But these were quickly abandoned after a neighbour who lectured on architecture at the University of Technology in Sydney warned him there was no money in the profession.

"I wouldn't suggest I actively sought out academia, necessarily. But I was consistent in what I did, whether it be my friends, my family life or my school life," Hamilton says.

He switched gears to an undergrad in economics at University of Sydney. One of his professors was Yanis Varoufakis, who in 2015 was briefly Greece's minister of finance during the country's debt crisis.

Hamilton looks back on the classes fondly, saying he feels lucky to have been lectured by someone of his calibre.

He says he enjoyed the social sciences aspect of economics before starting the degree and loved learning about things like industrial relations at university.

The interests had some family connections. His grandfather, Raymond Hamilton, was a Labor minister for the Namoi electorate in New South Wales.

"I am very interested in in politics, I find the altruism of politics is very powerful. I mean, notwithstanding some of the noise that you get around issues and incidents that occur, most people probably enter politics for very noble and genuine reasons," he says.

"You'd have to say a lot of what that generation of Labor leaders [Bob Hawke and Paul Keating] did has been extraordinarily powerful for the economy 20 years, 30 years later."

But for his own career, Hamilton stuck to the for-profit side. He started as an equities dealer and then an analyst at Rothschild, first in Sydney and then in Boston. This was followed by 16 years "more or less" in London before a return to Sydney for the job at Challenger.

"I'm not opposed to for-profit obviously, I never made a conscious decision...I like business, I like the idea of growing things. I think it's important for the economy," he says.

After quitting Rothschild for a three-month gap to travel through Africa, Hamilton followed his brother to England, who still lives there and works as a computer programmer.

"The city was booming in the 90s and there was a job at Goldman and there was a job to become an index fund manager. And then there was a job at Reuters within the Lipper business to build a global portfolio analysis business in funds management, working with Steve Lipper and I chose to do that," Hamilton explains.

The Reuters business and Morningstar dominated the funds research market in the US, seeing Hamilton spend time at Reuters' development centres in Denver and Boulder. But eventually he longed to come back to funds management.

And here is the interesting part.

In 2003, Hamilton was hired into Invesco's Henley business by Neil Woodford and Bobby Yerbury. He worked directly for Woodford for about three years before moving to Invesco's global equity business and then the multi-asset business.

He would eventually leave Invesco to join Woodford as one of the four co-founders of his boutique, which as we know now, suffered hefty losses due to illiquid investments in 2019.

"Neil was an exceptional fund manager in his time at Invesco Perpetual. However, what happened at Woodford in the UK has done significant damage to a lot of ordinary people," he says.

"In the end it was a liquidity trap, with the fund investing into stocks that time has proven should not have been in this type of vehicle.

"You know, there was clearly some very significant issues and I can probably say this now because the Woodford business no longer exists, but I probably wouldn't have said it before."

Hamilton left Woodford, alongside another co-founder. They signed separation deeds with confidentiality agreements, but a 2015 story from Financial Times reported the duo were interviewed by UK's Financial Conduct Authority upon exit regarding their concerns at Woodford.

"We didn't leave because the opportunity wasn't great...on the firm's first proper day post-authorisation, I remember loading onto our trading system our first client's portfolio of £3.5 billion. Within months the FUM was more than double that.," he says.

"It was very hard to come out of a business that was that successful into the London market and to explain to people the reason you had left something was because of the position you took against something else.

"And we were aggressively pursued by the firm's lawyers when we decided to leave, but I would not change anything about the decision I made at that time."

Hamilton's LinkedIn is now scrubbed clean of the time he spent at Woodford. He has come to be known instead for his role at Challenger.

After Woodford and a six-month stint at Colonial First State, Hamilton joined Challenger first as the general manager of its multi-boutique business Fidante Partners, which at the time had about $40 billion in total assets.

In October 2019, Hamilton was promoted to chief executive of funds management after Ian Saines retired. The new role added to his purview Challenger's internal investing business which has since sought external clients including in overseas markets.

Fidante had its highest ever inflows in the December 2020 half, making it - by its own assessment - the fastest-growing listed fund manager in Australia across Magellan, Perpetual, Platinum, Pinnacle and Pendal.

On the way, the business has had some hiccups. An investment in a London boutique, FME Asset Management ended with a $9 million write off after the strategy didn't work.

"Their strategy relied on making observations of market order books. And under back testing it worked extremely well, under real money - and maybe it was a circumstance of time - it worked less well," he says, adding FME's strategy probably belonged better in a fund-of-fund hedge fund structure.

"...We accept that 100% of things we do will not be right. And you can do nothing and get nothing wrong, but you'll definitely get nothing right either."