CoalFace Capital's Declan McEvoy on clichés, robo-advisers, and pink hair

Harriet Green
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"I’m certainly not the first to ponder how to connect capital with decent managers – it’s just quite tricky," says McEvoy

Plenty of people must have sat in their banking job thinking about what could be done better and wondering if they should just pack it all in and start their own business. Declan McEvoy, founder of innovative trading platform CoalFace Capital, first realised he wanted to be this person back in 1999, while doing his MBA. “Even then I wanted to be an entrepreneur. But life came along – we had some more children, and taking on that kind of risk didn’t seem feasible. You settle down and get your head down, don’t you?”

Having dropped out of college, the Dubliner started trading (returning to night school later) aged 19. In 2001, he switched to the sales side. “I’ve seen both sides of the equation during my career,” which spans JP Morgan, Citi, Barclays, UBS and Standard Chartered. “The concept for CoalFace arose from the idea that it’s pretty difficult to become a hedge fund manager. There are a lot of people out there who would make fantastic managers, but they haven’t followed the ‘go to an Ivy League college, start at right investment bank, get the opportunity to trade and get some capital’ route. That’s obviously a very sensible filtering process, but it does mean that a lot of people don’t get the opportunity. I’m certainly not the first to ponder how to connect capital with decent managers – it’s just quite tricky.”

Early days

CoalFace launched just before Christmas. It’s a virtual fund that links traders with investors, using technology and existing trading platforms. There are two stages to this. Stage one is building critical trader mass, gathering performance data and, therefore, ensuring as accurate and robust algorithms as possible. As a trader, you sign up on CoalFace to trade via one of its broker partners, which gives McEvoy’s firm permission to get real-time downloads of your trading data. You continue trading as normal with your own money but agree to CoalFace monitoring your performance. In return, it’ll pay you and offer feedback. Performance is then ranked in the CoalFace league table. Monthly payments are made based, first, on your level of activity and, second, your rank in the table. The platform currently partners with brokers FXCM, FXPro, ADS, CMC and Hantec Markets, with more deals in the offing.

Stage two is CoalFace’s relationship with investors. McEvoy is working on this now, and the plan is to partner with a prominent investment fund which can simply track and replicate the performance of Coalface’s top traders. Fees from the fund will then be shared with traders. It’s early days, but McEvoy is confident he can hit 10,000 users in the next 12 months. “This is the Kevin Costner Field of Dreams stage – build it, and they will come.”

But McEvoy isn’t one for clichés – or, at least, when it comes to entrepreneurship. “People kept telling me that, if I knew how hard it would be, I wouldn’t do it – and I’m beginning to understand that! It’s a lot to get up in the morning knowing you’re going to spend the day working but not drawing a salary. That’s why belief is so important.” Strategy is twofold, says McEvoy – formulation and implementation. “Everyone loves formulation. It’s like being told by your art teacher at school that you can draw anything you like. Implementation is settling on a farm and being told you need X number of chickens and cows on the page.”

Hometown glory

Being in his home town of Dublin has been invaluable for McEvoy. “I could’ve set up anywhere – but my team has known each other a really long time; that helps.” CoalFace has been tapping into the R&D the city has to offer, working with the Centre for Applied Data Analytics Research at University College Dublin on its algorithms. McEvoy is in London regularly, but doesn’t “regard moving between the two as a big hassle. You could commute daily if you really wanted to. It’s great to work in both. And I don’t want to get all political, but when I think back to being in London in 1995, it was more difficult having an Irish accent. Obviously it’s completely different now. I was in KPMG’s office the other day and it was all grungy and hip. There was a woman with pink hair. It’s all happening there in fintech and that’s great.”

But one fintech evolution he is keen to critique is “robo-advising”. “The term is a bit like ‘hedge fund’ in that it’s become a catch-all for breaking down the process of investing and seeing what can be automated. It’s fine to automate smart beta, but when something goes wrong and there’s no manager to admit they’ve done a bad job? It’s a very sexy world for young investors now, but they might find that they dip their toe in and lose a lot of money. I’m not anti-social trading (mainly beause that sounds awful!), but I am anti-copy trading. The aim is always to deliver the best returns possible – that means you need someone managing.”

New world order

It’s a similar story for banking, says McEvoy. “There was an awful lot of hubris pre-08. Each personal was relying on the next to do their job properly. The banks became sales businesses, and targets were just upped and upped, along with bonuses. Of course things have changed massively. And bankers are even pushing back a bit because of the huge amounts of regulation, but you can’t really feel sorry for them.” The question we should always be asking, he adds, is what kind of people we want running banks? Entrepreneurial, a more conservative breed? “The little bubble of Ireland is a very good case study, actually. In the early 90s, no small businessperson could get a loan. Anglo Irish changed that. It came along, got a reputation for listening to small firms and took some risk. Unfortunately, it got too much into development, and it went wrong. But you’ll still find Sean Fitzpatrick [the ex-chair of Anglo Irish] at the table of any black tie event hosted by a business in Dublin – because he gave that business its first loan.”

Now, McEvoy is focusing on growing his own small business – he’s bootstrapped so far but is launching a friends and family round shortly and Series A in the summer. “It’s an extremely scalable business. In the event we vote Remain in June, we can roll out across Europe very quickly.” On Brexit, McEvoy says that, while he does sympathise with those who have frustrations around the lack of transparency and level of bureaucracy in the EU, “the natural position of someone Irish is to be concerned. The UK and Ireland do around £1bn a week in trade – how would that be affected? Much like a marriage, I think it’d be better to work on it from the inside.”

But as a startup, McEvoy knows he’s got to be prepared for every eventuality. “You’ve got to be ready to fail fast, pivot, and go again. And if things really don’t work out, I suppose it’s back to banking!”

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