An uncertain world
BY HELEN BURGGRAF
That financial markets
abhor uncertainty is an
often quoted maxim in
investment circles. Almost
as widely acknowledged
is that uncertainty and disruption
can wreak havoc
with the peace of mind
of investment fund managers
and thus, it is widely
assumed, the prospects for
their funds.
This is why fund pickers
pay particular attention
to mergers and acquisition
talk involving the fund
houses they hold. Many
say they will often sell on
the first news of a pend-
ing ownership change,
or when a fund manager
announces he or she is
leaving, rather than sticking
around to see how
events pan out.
Institutional fund buyers
are said to be more cautious
than retail investors
or multi-managers about
the funds they buy for
just this reason, because
they are not able to react
as swiftly to news that an
asset management house
is in trouble, about to be
acquired, or otherwise
is entering a period of
transition.
l Looking for stability
“Fund managers like stability,
as do the people who
buy their funds,” explains
Caspar Rock, deputy
chief investment officer of
Architas Multi-Manager, the
Axa Group fund house.
“If we are invested in
a fund and the manager
who runs that fund ends
up leaving, as a result of a
takeover, say, then we can
simply sell that fund, and
we can make that decision
very quickly,” says Simon
Mungall, manager of three
Ignis Asset Management
multi-manager funds.
A couple of times
recently, he notes, Ignis
sold an investment in a
fund the day that the news
was announced.
Tony Yousefian, chief
investment officer of OPM
Fund Management, adds:
“I should imagine that
about 95% of the time,
we would leave a fund
with the departure of its
manager, because staying
put and giving an incoming
manager the benefit
of the doubt could cost us
money.”
The reason this matters
is because some experts
are predicting that consolidation
in the European
funds industry is likely to
continue over the next few
years, even though there is
little enthusiasm for new
initial public offerings, and
VIEWPOINT ASSET MANAGER CONSOLIDATION
With fund industry consolidation expected to continue, experts consider
what this means for fund investors
Recent M&A, IPO deals
not much ready cash available
to pursue deals.
As a number of recent
transactions have shown,
those keen to do deals
typically get around the
lack of ready cash by
structuring deals with significant
stock-for-equity
components.
l Lack of appetite
When Credit Suisse agreed
to sell its fund management
arm to Aberdeen Asset
Management in the last
days of December 2008,
for example, it received a
24.9% stake in Aberdeen
and a seat on its board in
lieu of cash.
A measure of the lack
of appetite for IPOs,
meanwhile, is reflected
in Gartmore’s flotation in
December 2009, having
been the first European
IPO of a private-equityowned
company since the
economic downturn struck
in 2007.
Gartmore also ended up
Acquirer Acquired Details
Aberdeen Asset Management Credit Suisse’s fund management arm July ’09; deal involved swap of 24.9% stake in
Aberdeen and seat on Aberdeen’s board.
Aberdeen Asset Management Almost half of Royal Bank of Scotland’s Announced Jan ’10; £85m deal to be funded by
asset management business share placement
Aberdeen Asset Management Management of Bramdean Alternatives’ funds Nov ’09 deal valued at £4.5m
BlackRock Barclays Global Investors £9.1bn deal at end ’09 included BGI’s iShares
ETF operation
Henderson New Star Asset Management Deal completed in April ’09 after publicly-traded
NSAM collapsed in ’08 and ended up in the hands
of its banks
Public (London stock exchange listing) Gartmore December floatation by Gartmore’s private equity
owner Hellman & Friedman valued at £676m
Ignis (fund boutique company created Funds of Axial Investment Management and Ignis was formed by the ’08 acquisition of listed
and owned by Resolution)
Source: Yale University, as at 30 June ’09
Resolution Asset Management insurance giant Resolution by Pearl Group
“
I should imagine
that about 95% of
the time, we would
leave a fund with
the departure of its
manager, because
staying put and
giving an incoming
manager the benefit
of the doubt could
cost us money
”
Tony Yousefian, chief
investment officer, OPM Fund
Management
SUMMARY
Consolidation of fund
managers is likely to continue
over the next few years,
despite little enthusiasm for
IPOs and a dearth of cash
available to pursue deals.
The introduction of Ucits IV
in 2011 may prompt further
consolidation.
However, UK asset managers
are generally in a strong
position, having benefited
from the bull run on equities
in 2009.
MARCH 2010 [www.portfolio-adviser.com] PORTFOLIO ADVISER
29
To view a Ceros magazine you need to have JavaScript enabled in your browser and have the flash player 8 or higher installed. To install the latest flash player, click the icon above, install the flash plugin and then click here to refresh this page.