Mega fund manager M&A deals ‘will lead to job losses’

Fund management experts have claimed there will “inevitably” be job losses and fund mergers following the move by Standard Life Investments (SLI) to buy Ignis Asset Management.

SLI confirmed its intention to buy Glasgow-based Ignis last week in a mooted £390m deal, which now needs to undergo regulatory scrutiny.

The deal comes hot on the heels of other major transactions in the fund manager space that have also been completed in recent weeks.

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Aberdeen Asset Management’s purchase of Scottish Widows Investment Partnership (Swip) has been finalised, and BMO’s takeover of F&C Investments has now been confirmed.

SLI made clear its appreciation of Ignis’s Absolute Return Government Bond fund, which has hit £2.9bn having launched in 2011, and noted how its investment process was “complementary” with funds of its own such as Global Absolute Return Strategies, but there was no mention of other franchises.

This has led fund buyers to predict the deal is likely to result in job losses and fund mergers, with the pain likely to fall on the Ignis side of the fence.

Gavin Haynes, managing director at Whitechurch Securities, said there was expertise Ignis could bring to SLI, including fixed income and property, but that in other areas it was weaker.

“In most areas of equity markets, SLI already has very strong propositions compared to Ignis,” he said.

“I would expect that a lot of the Ignis equity funds will be merged into SLI funds over time.”

Darius McDermott, managing director at Chelsea Financial Services, said job losses in such transactions were “inevitable”.

“Ignis has noticeably turned a corner in the past couple of years and has a good liability-driven team, and it rates team is also doing very well,” he said.

“But there are huge areas of overlap. I am sure you will find some of the better regarded franchises retained or merged, but where SLI outperforms we will see job losses.”

Andy Merricks, head of investments at Skerritts Consultants, agreed Ignis’s bond team was strong, as well as its European Smaller Companies fund.

“There are bound to be people leaving and fund mergers,” he said.

“I think SLI has a very good fund range, anyway. It looks more to me like an asset gathering rather than individual gathering.

“They will have a look and see who fits and wait to see who decides to go elsewhere. After a few months we will probably get an announcement about rearrangements happening.

“With any corporate merger or takeover, both sides should have a look at each other before deciding who or what they want to keep. I know which side is the dominant one in this deal.”

Brian Dennehy, managing director at Dennehy Weller & Co, said he had recommended Ignis’s Property fund in the past and some of its “recent absolute return fund launches (or at least the expertise behind them) would certainly interest SLI”.