We met with Dan Caps, investment manager at Evelyn Partners and a fellow North Londoner, at the lovely 1 Lombard Street for the first edition of the ETF Lunch Hour – a real treat.
Since it was only midday, a lighter fish lunch was the perfect choice. Dan went for the sea bass, while I opted for classic fish and chips even though it was a Tuesday – sometimes you just can’t go wrong. The tartar sauce was fantastic.
Turning from the charms of 1 Lombard Street to our conversation with Caps, he shared that his first exposure to finance was through his father, an IFA who worked from their North London home.
Inspired by his father’s path, Dan began his career as a financial planner, learning the ropes of the industry. Though he valued the experience, he soon realized the role didn’t fully resonate with him and grateful for the foundation it provided, he decided to explore other avenues in finance.
He began his career at Moore Stephens, a traditional accountancy firm with a wealth management division, where he worked as a paraplanner. The firm managed its investments in-house and had recently adopted a passive investment strategy.
It was during this time that Caps experienced a lightbulb moment, discovering that this was where his true interests lay. Following that realization, he spent the next ten years overseeing the firm’s passive investment offerings.
They were subsequently acquired by Tilney, a firm that offered a full range of investment products but needed to strengthen its passive strategies. This led to the merger with Tilney and Smith and Williamson in 2020, combining two companies that each had in excess of £20bn in assets under management (AUM).
As the merger progressed, the development and launch of passive investment offerings had to take a back seat. However, once everything settled, Caps jumped in and currently manages passive and factor-based strategies, including the Evelyn Partners Index MPS Range, and co-manages the Smart range on Bestinvest.
His role also involves portfolio construction and working alongside eight other of the firm’s investment analyses in the Passive Fund Research Team. While the funds he works with are passive, his job remains quite dynamic. He and his team currently oversee £4bn in passive funds and ETFs, along with £3 billion across the suite of MPS offerings. “Passive funds are all I do,” he states.
However, that wasn’t always the case. Caps recalls that in the early 2000s, he invested in some active funds, including the then-called New Star Technology Fund and the JP Morgan Natural Resources Fund, chosen based on their strong past performance.
However, they subsequently tanked shortly after purchase and were eventually sold at a loss, providing an invaluable first-hand lesson in the risks of chasing past performance in investing!
Speaking about active management, Caps notes that there’s currently a lot of noise in the market surrounding active versus passive investing, advising people to try to ignore the distractions.
The market can be overwhelming, but what really matters is “time in the market, not timing the market.” We also discussed the growing trend towards passive investments and ETFs.
The conversation shifts from the markets to the role of investment managers, wealth managers, and independent financial advisors.
Caps remarked: “History doesn’t repeat, but it often rhymes and that parallels can be drawn from the past between now and then”.
He explained that if an investor had held onto the S&P 500 since before the dot-com crash in September 2000, it would have taken over 11 years, factoring in dividends and before taxes, just to break even.
Relying on a single asset, he argues, can create a false sense of security, as the importance of diversification and rebalancing is often overlooked. Caps likens this to "sleepwalking into a crash," noting that many average investors end up performing worse than the funds themselves by buying and selling at inopportune times.
He warned that complacency is on the rise and that simply investing in the S&P 500 or the MSCI ACWI tracker alone is no longer a surefire strategy. Explaining these complexities to those unfamiliar with investing can be challenging – a task where professional investment managers can provide valuable guidance.
I indulged in my crème brûlée while Caps wisely opted for a coffee after our main courses and almost naturally, our discussion steers away from the markets to Arsenal.
“Anyone who knows me for five minutes knows I love Arsenal,” Caps said, explaining that he’s from an Arsenal-supporting household – his whole family, even his mother.
As a fellow Arsenal supporter, we dive into discussing the team’s current standing and performance in the Premier League. Being North Londoners, this topic was inevitable – unless one of us had made the tragic life decision of supporting Tottenham, in which case, we’d have nothing worth talking about!
It was also fascinating to learn that Caps once played chess for England as a junior, even captaining the London team in tournaments in Hamburg and was part of the England team in Ukraine[DC1] . He believes this experience helped shape his analytical thinking, which is essential for his role today. His love for chess has continued into adulthood, as he is currently a member of his workplace chess team.
Optimistic: As a passive investor, it's encouraging to witness passive investments growing in prominence in the US. There’s a growing trend in this direction in the UK as well.
People are now well-informed about passive investments, so there’s no longer a need to explain the concept. Being a passive investor now feels more aligned with the current landscape, where it no longer feels like swimming upstream.
This shift has driven costs down, and the advantages of a passive approach are clearer than ever.
Pessimistic: In the Premier League so far, Arsenal has faced challenges with injuries and disciplinary issues.
Key players like Thomas Partey and Gabriel Jesus have missed important matches, and red cards have disrupted the team’s flow. Because of this, Arsenal has dropped points and could be higher in the league. However, the squad has shown resilience and depth, managing to stay competitive.
Once everyone is back and healthy, there’s a lot of excitement about what they can achieve together this season!
