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Tatton eyes DFM takeovers

Tatton eyes DFM takeovers

Listed investment management firm Tatton Asset Management expects to be part of a wave of consolidation in the discretionary fund management (DFM) market in the years to come.

The annual results of Tatton Asset Management released this morning (3 June) showed the company had assets under management of £6.1bn, with a statutory profit of £6.1m, and has net cash of £12.2m, which is £1.6m more than the previous year.

Tatton also operates the Paradigm Mortgages business, and Paradigm Consulting, a compliance outsourcer. 

Company chief executive Paul Hogarth said while there may be some potential for acquisitions within the mortgage and outsourcing business divisions of Tatton, the most likely focus of any acquisition activity was the DFM area.

He said: "We want to grow, and so that means we have to invest, and we will do that within the business, we have six sales people now, and we would certainly look to expand that if the ideal person came along.

"But there is scope there to look at M&A activity, we have cash on the balance sheet, though it is not exactly burning a hole in our pockets.

"I think there is potential for a lot of consolidation in the DFM market, and it would be lovely for Tatton to be part of that. We are very aware that the key metric for us is funds under management, and that number is rising."

The growth of the company’s assets under management has been rising by about £1bn a year, which has helped the company’s operating margin rise above 40 per cent.

Tatton expects further billions from its recent deals with advisers Tenet and Frenkel Topping.

The company announced this morning it had won contracts to provide model portfolio services to Tenet and discretionary fund management services to clients of Frenkel Topping.

Mr Hogarth said: "Tenet must be one of the top four or five IFA distribution businesses in the UK, the management there had been looking at the model portfolio service they offer, and were worried how fit it was for purpose.

"So they had a tender and we won that which we were delighted with. Our task now is to talk to Tenet firms, including those who presently don’t use the MPS service, to see if we can do business with them.

"Frenkel Topping are a business located near to us in Manchester, so we knew them. We were talking to them about various things, and during those chats, it became apparent they could make a saving by getting us to run the discretionary fund management they had."

He declined to put a precise figure on the gain to Tatton’s assets under management from the two deals.

But he said: "Potentially there are about £2-3bn of assets we could win from Tenet clients and £300m from Frenkel Topping clients on top of that."

david.thorpe@ft.com