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Buy-list restrictions see UK selectors fall into line; A gear shift for wealth M&A

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Earlier this month we noted that remote working has perhaps hindered smaller fund firms’ ability to make a good impression on fund selectors. But even prior to the pandemic there were factors that often counted against them.

Getting onto professional fund selectors’ buy-lists has long been the standard route to success for asset managers, and that’s easier said than done for newer businesses.

Some, like the Buffettology or Blue Whale strategies, have managed to short-circuit that process by finding favour with retail investors. All that said, centralised buy-lists have clearly strengthened their stranglehold on fund selection practices in recent years.

The FT Discretionary Image Europe 2021 study provides more evidence of this fact. Historically, UK selectors have had much more freedom than their European counterparts when it comes to picking funds from outside their firm’s buy-lists. Nowadays, the distinction isn’t so great.

The study, which surveyed DFMs from across the continent, found 71 per cent of UK buyers do have the flexibility to go off-list – a percentage not too far removed from the continent-wide average of 64 per cent.

Another finding is more pertinent still: of that 64 per cent, fewer than one in five granted such freedoms said they regularly make use of it.

That suggests that even those who do have flexibility in theory are relatively wary of using it in practice – and UK selectors will be able to sympathise with this sentiment as much as any of their European peers.


The ongoing consolidation across the wealth management industry isn’t likely to produce more diversified buy-lists, either. The acquisition of Tavistock Wealth by the newly launched Titan Wealth Holdings this morning is another example of how merger and acquisition activity has ramped up again in recent months.

This acquisition isn’t a particular surprise, given the wider Tavistock business had already received at least one other offer this year. Nor is the nature of Titan’s backers – two private equity firms – anything unusual nowadays.

But the wave of money looking to achieve a return by buying wealth management businesses is starting to produce some slightly different sights. The FT reports this morning that Titan is in talks with no fewer than six other DFMs with between £100m and £1.5bn in AUM.

That suggests the consolidator model that took off in the advice space several years ago is starting to bear down on wealth managers, too.

Combining several wealth firms at once would be easier said than done – and arguably be subject to more onerous scrutiny, given clients are nowadays often advisers rather than retail investors.

Tilney Smith & Williamson is an example of a similar process, but even now many of its functions remain separate. What’s more, that series of mergers took place over a number of years.

Buying up several businesses all at once is a different matter – as companies get swept up in the consolidation game, the risk is that standards start to suffer. 

High stakes

Last week saw the resurrection of an old debate after Interactive Investor called for the FCA to introduce rules requiring fund managers to reveal their “skin in the game”, ie how much they have invested in their own funds. That’s a question often asked by DFMs as part of the due diligence process, but it does have its drawbacks.

The first is that it’s no silver bullet, as the example of a certain Oxford-based fund manager shows.

Some may say every little helps, but again this only applies in certain circumstances.

Equity fund managers may be more inclined to invest in their strategies than bond fund managers, for instance – particularly if they are in the accumulation phase of their own retirement plan. And there can be little doubt that fund managers are already healthily incentivised to make their strategies to outperform. Not owning their own fund shouldn't be seen as contradicting that impulse.

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