Selectors see benefits to OMGI spin-off

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Selectors see benefits to OMGI spin-off
OMGI boss Richard Buxton (left) is reportedly keen on spin-off from Paul Feeney’s Old Mutual Wealth

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. 

OMW’s decision to absorb OMGI’s £16bn multi-asset unit follows the division’s integration with Quilter Cheviot, the firm’s wealth management and discretionary manager arm.

Mr Blythe said the multi-asset business – to be led by current OMGI investment director Paul Simpson – could suffer by not being able to rely on OMGI managers’ expertise.

He said: “The only real reservation is what may be lost to the multi-asset team as a result of not having the cross referencing of ideas with the OMGI team.”

 

Mergers, acquisitions and staff turnover create uncertainty over funds

Corporate activity in asset management is making it hard to accurately assess funds, Fundhouse managing director Rory Maguire has warned.

Mr Maguire suggested that uncertainty about the likelihood of a manager staying in place against a backdrop of mergers, acquisitions and broader corporate activity made it difficult to rate products.

He said: “That’s tough for us if we don’t know a manager will still be there in six months. We are trying to make sure the environment is stable and people have the right incentives.”

He noted that while high-profile mergers had dominated investor attention, other activity – for instance Newton’s decision to create a chief investment officer role earlier this year – also created uncertainty.

He said: “There are lots of businesses going through a restructure that are in themselves the equivalent of substantial change.”

Manager departures have an inevitable impact on how ratings agencies and investors view their funds. 

Last week The Adviser Centre cut the Standard Life Investments Emerging Market Debt fund from its recommended list after emerging market debt head Richard House left the firm.

Chief investment officer Peter Toogood said: “Given the significance of this team change, we have removed the fund.”