Elevated merger and acquisition (M&A) activity in the wealth and discretionary management space has increased the pressure on fund managers’ product offerings, according to Polar Capital’s Iain Evans.
The boutique’s global head of distribution warned that such activity had further accelerated the concentration of fund selector buy lists.
This trend has increased the stakes for asset managers, to the extent that inclusion on one or two lists is becoming the difference between success and failure.
“We see lots of private wealth managers consolidating. The challenge with that is we get greater concentration of the fund buyers, which makes [selection decisions] very binary,” Mr Evans said.
This year has seen another acceleration in the pace of M&A deals among wealth management firms, typified by Tilney Bestinvest’s £600m deal for Towry in April.
The combination followed other major wealth tie-ups, such as Kleinwort Benson’s acquisition by Société Générale and Liechtenstein’s LGT Group buying a majority stake in Vestra Wealth.
“If you are on [the buy lists] as a fund, that’s fantastic. But if you are not in, that’s a problem,” Mr Evans said.
He noted that Polar Capital was facing greater competition from rival fund firms for its traditional client base.
“Our distribution strategy has been very simplistic,” he explained.
“We focus on private wealth managers, the banks and fund of funds. We don’t have the resources to visit the smaller advisers. Groups are focusing on coming after our breakfast, lunch and dinner to try to dislodge [them].”
Polar is focusing on expansion as one means of ensuring it continues to remain at the forefront of fund selectors’ minds.
Investment Adviser revealed last month that outgoing Miton UK Value Opportunities fund managers George Godber and Georgina Hamilton are to join the firm in the coming months.
Mr Evans declined to comment on Polar Capital’s plans for the incoming recruits, but said the boutique was taking an “open” approach when considering new teams of managers.
“We are open in terms of investment focus and asset class, as long as it is complementary to our exiting teams and funds and the investment approach adopted by the manager is a fundamental research-driven one,” he explained.
His comments follow an April update to the stock exchange in which Polar noted a “pipeline of further recruitment activity” meant the fund house had revised its targeted number of teams upwards, from a historic range of 10-12 to a new goal of 12-15.
“We have spent a number of years building up our operational support structure within Polar Capital and this now means we have the necessary resources to offer additional teams the highest level of support, while maintaining the culture of our group,” the company added.
Assets at the boutique stood at £7.3bn as of March 31, down 12 per cent year on year in part due to outflows from its Japanese equity strategy, which has underperformed since the introduction of the country’s Abenomics stimulus programme.