Clients of Old Mutual Global Investors (OMGI) could benefit from a separation of the business from its parent firm, according to buyers, as rumours grow over a potential spin-off.
Last week Old Mutual Wealth (OMW) said it would absorb OMGI’s £16bn multi-asset unit into the wider business. The firm said it was considering future “internal or external” structures for the rest of OMGI, with the FT reporting that Richard Buxton, chief executive of the fund arm, was keen to buy out his division.
Fund buyers have been undeterred by the potential loss of support for fund managers. Some see benefits in OMGI being a standalone business.
Fundhouse’s Andrew Macfarlane said separating from OMW would benefit OMGI’s managers and investors. The wealth business has pursued a vertical integration strategy, enabling it to sell its own funds across the platform, advisory and discretionary wings of its business.
Mr Macfarlane said: “There’s nothing better for a fund manager than not having internal clients. They overlook poor performance and get fee deals and ask you to do things you should not do [in terms of investment strategy or product launches]. OMGI [would] live or die by its performance. It should be good for them.”
Mr Buxton’s arrival at OMGI in 2013 heralded a time when several high-profile managers joined the firm, but MitonOptimal managing director Alan Blythe said the key to the firm’s success remained its longer serving figureheads.
“If they can keep the team together there would appear no reason why they cannot go from strength to strength,” he said.
The business’ reputation was built around a UK equity team that had been highly respected long before Mr Buxton’s arrival. James Calder of City Asset Management suggested some core offerings in this area, such as Richard Watts’ £3bn UK Mid Cap Strategy, could be nearing capacity – a development that would force the business to look elsewhere for long-term success.
Daniel Nicholas’ £1.3bn UK small cap fund is also one of the largest in its peer group. OMGI was unavailable for comment on the subject of capacity.
On the merits of a spin-off, Mr Calder said: “There might be the odd person that doesn’t like it and goes, but as long as key people stay [that’s fine]. We don’t want to be in a situation where we have a different proposition.
“I’m not that bothered about the corporate structure as long as the fund managers are happy.”
Outside the UK team, several well-known managers have left OMGI in recent years, including fixed income head Christine Johnson, European equity manager Kevin Lilley and absolute return specialist Russ Oxley, which rattled investors.
At the time, fund buyers suggested corporate uncertainty might have been a factor. OMW is set to list on the stock exchange next year as part of a “managed separation” from Anglo/South African insurer Old Mutual.