Smart money: How Roger Montgomery created a fund management business with a difference

Smart money: How Roger Montgomery created a fund management business with a difference

Roger Montgomery has always taken care of other people’s money. First as an employee of large investment banks and now as the driving force behind boutique Australian fund Montgomery Investment Management, which he founded on Christmas Eve in 2010. The fund now turns over between $5-10 million each year and the 42-year-old Sydneysider manages a team of nine.

Montgomery Investment Management is a boutique Australian funds management business with a unique emphasis on individual investors. We aim to foster direct relationships with investors.

My background has always been in investment, since finishing university in the early 1990s. I worked for many large companies before setting up another fund management business, which I listed six months prior to the global financial crisis.

I was then approached by a number of high profile people in the industry about establishing another fund.

The decision was made with my family about whether we go into business again. This time, we decided we would have control over who we work for and who we work with.

That was Christmas Eve 2010.

We wanted to deliver something investors didn’t already have, services or products that weren’t being offered.

One of the issues is that a vast range of investment products in our industry are arguably there to serve their vendors and not investors. We wanted to refocus our efforts on the investor, offer them really great returns and insight.

I funded the company by myself but everyone on my team is ultimately a partner in the business. Some of our investors were also partners.

We have just one external investor in Magellan Financial Group. They are a small investor but significant because they are our only external investor. And we’re the only boutique they have invested in.

One of the things you’ll notice if you come to our office is a panel of six frames, each of them with 100-200 photos of the investors we work for. It’s the pinnacle, the promise we deliver, the people we’re working for. It’s a reminder of our success but also the way we will be delivering on that promise.

We’re working for real people and their life savings.

We’ve grown through word-of-mouth and we haven’t spent money on advertising. We spend a lot of time on education.

We’re trying to instil in the Baby Boomers and retirees and self-managed super fund investors this idea that you can become successful in investing provided you have three ingredients: a high quality business, a great price and bright prospects.

The other secret is patience.

There are two primary ways to approach investing, but the most common one is to treat it like a roulette wheel that goes up or down. What passes for commentary on the sharemarket is ultimately a bet on up or down.

We focus on investing in a portfolio of outstanding businesses we believe will be big in the future.

Our industry has grown up around this idea that if we make things convoluted and complex, then investors will need us. That idea permeates financial services.

I like to think we’ve flipped that on its head. The more informed the client is, the better. They will stick with the method.

My business plan is a one-page roadmap. I know precisely where we want to be.

Our Private Fund and the Montgomery Fund are funds that are unlike any other in Australia as we hold very large amounts of cash and therefore can protect investors’ capital in the event of a stock market crash. It’s a huge differentiator.

What keeps me up at night is ensuring that we can continue to find high quality people to deliver on the promise we’ve given to investors. It is easy to find quality people, but it’s not easy to find really high quality people.

Warren Buffett says the best people have three attributes. They are energetic, intelligent and honest. But the most important quality is honesty. The other two characteristics can send you broke.

We generate revenue first and then we bring in additional people. We make sure we can support the people we’ve brought on, and not just on a minimal level. We want them to be financially successful as well as our clients.

Montgomery Investment Management is my future. I would like to see stability in our team for 10 years or perhaps two or three decades. I will keep doing this until I can’t keep doing it anymore.


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