Editor: A Lion’s Roar Always Has Consequences

Liontrust’s latest acquisition hands it another £5bn in assets. But whatever the talk of continuity, such deals usually always spur the next wave of change

Ollie Smith 10 December, 2021 | 10:21AM
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A lion

The numbers £80 million and £40 million may well be immaterial to you as you sit down and do the crossword over breakfast this Sunday. But if you happen in any way to be a customer of a company called Liontrust, they might suddenly matter a lot.

Liontrust, the acquisitive asset manager whose name last year became synonymous with a couple of highly successful ESG propositions, and employee-owned Majedie, the global institutional equity fund house not previously thought to be for sale, are set to merge.

That £80 million figure is the initial sum the former is paying for the latter, resulting in a £42.3 billion fund shop. The extra £40 million is on offer to Majedie for excess Net Asset Value and deferred considerations (sometimes known as earn-outs).

Warm Words

This deal is another case study in reassuring corporate takeover announcements. Such was the predictability of the messaging, you might as well have put your crossword to one side and started a bingo sheet instead. 

“Given the growing demand from institutional investors for global equity managers,” observed Liontrust chief executive John Ions, “we believe we can expand this client base further for the Majedie investment team, as well as take advantage of Majedie’s institutional expertise.”

The team at Majedie is likewise delighted. Chief executive Rob Harris said the deal marked “an exciting day for everyone at Majedie,” and that “the acquisition by Liontrust provides a compelling strategic and cultural fit.”

For now, it will be business as usual. Liontrust has confirmed Majedie’s fund management team under chief investment officer James de Uphaugh will continue as is. Its form on integrating businesses may also reassure clients of either business.

But with any big buy comes inevitable change.

Naturally, when Liontrust bought Neptune Investment Management in 2019, it rebranded Neptune’s funds as its own. Fair enough.

But it has since completed separate and specific overhauls of its fund business, selling its Asia Income Strategy to Somerset Capital Management (the emerging market specialist fund shop set up by now-Conservative MP Jacob Rees-Mogg in 2007) and consolidating its European income teams prior to the completion of its purchase of Architas last year.

You might choose to ignore talk of continuity, then. At least one analyst thinks further consolidation could be afoot.

“The fund ranges of the two companies look a decent fit, however there is the chance of some consolidation of the enlarged fund range, not least because Liontrust will have 19 funds that each have less than £100m in assets as they still look to tidy up the assets from their previous purchases,” says Ryan Hughes, AJ Bell’s head of active portfolios.

Rebalancing Act

For the end investor, this is a reminder that distant deals struck in City boardrooms always have consequences of some kind. As this market further consolidates, some may be concerned about a reduction in competition and consumer choice. Conversely, you might argue certain asset management businesses deserve to be enveloped. Bargain Hunt isn’t just a television show.

As such, it pays to be careful, and in particular to keep an eye on fees. Your high-performing ‘boutique’ asset manager may attract the attention of hungry acquirers because of its performance, but no deal can guarantee a perfect future, or a cheap one at that.

For its part, Liontrust is now a £1.4 billion business with around 205 employees. It is unlikely to sit still in a competitive marketplace, where fund houses are not only competing for your assets, but also competing to buy eachother.

In this moment of frenetic mergers and acquisition activity, it is worth re-establishing the link between corporate takeovers and fund transformations in your head.

Check your portfolio, and reacquaint yourself with any relevant fund fact sheets to see if anything has changed dramatically. As my colleague Amy Arnott points out this week, you may discover through this process that it’s time to rebalance your portfolio anyway.

And, in the event that you don’t like holding a company’s funds anymore, you could just buy the company itself. Liontrust’s share price growth alone is evidence enough that the markets approve of its spending sprees. Whatever your background, there is more than one way to get your claws into a company’s progress.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Ollie Smith  is editor of Morningstar UK