Think of activist investors and there are plenty of investment company targets that come to mind, Alliance Trust and Electra Private Equity being two of the most recent examples. But this year it’s a larger kind of investment company – fully fledged asset managers themselves – that have entered activists’ sights.
There is little surprise to this, given the increasing pressures being placed on the sector. As troubles approach, the calls for radical change grow louder. Hence a hedge fund seeking an overhaul at Gam, and now the news that one longstanding thorn in Aviva’s side is again seeking to draw blood.
Philip Meadowcroft, in part responsible for the ousting of the insurer’s then-chief executive Andrew Moss in 2012, has now turned his attentions to the firm’s asset management arm. Mr Meadowcroft suggests the division should be sold off, pointing to years of underwhelming performance stretching back to the Norwich Union days.
Aviva’s current chief executive, Mark Wilson, has not shied away from admitting there are problems with the unit. Mr Wilson has repeatedly referred to its contribution to company profits as “inadequate” relative to its assets under management. While Aviva Investors’ profits have almost doubled since the arrival of boss Euan Munro in 2014, assets have also risen sharply from £245bn to £345bn. The relative equation hasn’t changed much, partly because a fair chunk of this asset growth has come from the transfer of internal funds via Friends Life.
Regardless, the timing of the call to divest appears odd, because it’s undeniable that the business has had more joy than most when it comes to capturing investor interest lately. It has successfully done what many are trying to do: roll out a product rivalling Standard Life Investments’ Gars.
The firm’s pair of multi-strategy funds were the third and fourth best-selling portfolios in the UK in 2016, according to Morningstar, taking in a combined £3.5bn in one of the worst years for industry flows on record.
There’s less to speak of elsewhere. Chris Higham’s bond funds have performed well, but performance in most other areas is mixed, and the firm isn’t seen as a go-to business for any asset class in particular. However, if the future of active management is, as some are starting to suspect – being able to offer “solutions” that are harder to replicate in a passive format – this now matters less than it once did.
A business driven by absolute return alone is a precarious one: a drawdown for these funds has more serious consequences than it does in other asset classes, as Gars’ fortunes have shown. So there is plenty of work still to do for Aviva. But even a one-trick pony deserves better than the glue factory.
Dan Jones is editor of Investment Adviser