When Martin Gilbert stood down from his role as co-chief executive of Aberdeen Standard Investments in 2019, he could have greeted the prospects of retirement with a certain satisfaction.
As chief executive, he transformed Aberdeen Asset Management from a small, provincial company that made £87 profit in its first year into a business that, following its merger with Edinburgh rival Standard Life, became the largest asset manager in the UK.
And his retirement would have been buffeted by non-executive director roles as diverse as mining giant Glencore, fintech firm Revolut and the European Golf Tour.
But instead of going gently into the night in the manner typical of many other financial services professionals of his vintage, he instead became a shareholder in a listed business called AssetCo, where he has reunited with former colleagues and taken stakes in a number of asset management businesses and a platform.
Gilbert is chairman of AssetCo, with former Aberdeen Standard distribution director Campbell Fleming joining as chief executive at the start of October.
AssetCo was actually a cash shell when Gilbert bought it. Originally the company was founded to supply fire services to the gulf states, but when it lost this contract, it became a shell that Gilbert and his associates bought.
They have since raised capital and the annual report of the business shows the coffers were further boosted by the resolution of a legal case that predated Gilbert buying AssetCo. The case involved litigation against Grant Thornton, for audit failings.
The case was settled for £57.8m, of which £30m was made available to run the company and fund future acquisitions.
Further capital was raised via share issues, and the acquisition spree began.
Fleming says the long-term strategy for the business is inspired by former WPP chief executive Martin Sorrell, who upon leaving that business launched S4 Capital, which has made a number of acquisitions in the same sector, but is focused on challenger, rather than incumbent, companies, and on innovation rather than just consolidation.
Among the shareholders who joined Gilbert in the venture are Michael Spencer, who founded brokerage firm Icap, and also institutional investment firm Toscafund.
Analysts at investment bank Numis rate AssetCo shares as a buy, but say the main risk for shareholders is that future fundraisings are likely to take place as a way to generate cash for the next lot of acquisitions and the issuance of new shares may have a negative impact on the share price.
Saracen
The first financial services acquisition by AssetCo was Saracen Fund Managers, a fund house based in Edinburgh with assets of less than £120m spread across three funds. The company lost £6,000 in the financial year to March 2021, on turnover of just less than £1m, having lost £15,000 the previous year, according to data from Companies House.
The management of Saracen said prior to the takeover that they expected the business to return to profitability by 2024, and there was more than £300,000 in the bank at the end of the company’s accounting period.
A hint as to the attractiveness of the company to AssetCo comes from Fleming’s comment that “Saracen is a great brand and it has all the permissions needed to be an asset manager”.
Graham Campbell, chief executive of Saracen, says: “I think the big benefit of this deal for us is that our distribution is likely to improve. When you have funds as small as ours, it is very hard to get meetings with the big decision-makers, but I think having [Fleming] and his colleagues on board will help with that. And what we provide to AssetCo is a framework for a fund management business, and funds that have an excellent long-term track record.”
Fleming says his initial priority will be to help each of the companies in which AssetCo has a stake to grow “organically”, while helping Gilbert and deputy chairman Peter McKellar, with future acquisitions.
Fleming says: “None of us in the senior leadership team see this as a short-term project, I’m in my 50s and hope I have a lot of years to go – Gilbert is not slowing down. And [McKellar] has lost none of his hunger. Gilbert is an inspiring person to work with, he admires [former Man Utd and Aberdeen football manager] Alex Ferguson a lot, and like him, wants to do things to change things and build things.”
Gilbert built Aberdeen Asset Management largely through acquisition, but that was at a very different era in the market, a time when there were not hordes of private equity companies seeking to purchase the same assets.
Some industry figures believe it could be a challenge to replicate the Aberdeen growth model today, as valuations are likely to be higher due to the extra competition for assets
Fleming says his colleagues' experience of acquisitions will prevent them from overpaying. But it is worth pointing out that the acquisition of the tiny Rize ETF business, which had an AUM of about $450m (£332m today), came at a price of 8 per cent of assets. A similar deal conducted by Amundi to acquire the Lyxor ETF business came at a price that equated to less than 1 per cent of AUM, according to our sister publication the Financial Times.
Fleming says three of the trends he believes are long-term in the industry and which he hopes his business can capture are thematic investing, the rise of passive products and private assets investing.
Rize ETF tends to focus on themes, one example is cannabis production stocks, rather than countries, and all of the products are passive.
McKellar ran the private assets business at Aberdeen Standard Investments.
In terms of the acquisitions that come next, Fleming says AssetCo is open to acquiring wealth managers as well as asset managers.
River and Mercantile
AssetCo has a stake in fund house River and Mercantile of just over 5 per cent, with Fleming saying the motivation for the deal was partly to “help the company change and improve”.
Gilbert is deputy chairman of the company, while Alex Hoctor-Duncan, global head of Aberdeen Standard Investments, is soon to join the board as an executive director with responsibility for business strategy. The company issued a trading update in May 2021, saying it managed around £44bn of assets.
In the most recent set of full year accounts, filed at Companies House and covering the year to March 2020, the company recorded a profit of £12.6m, down a little from £13m in the previous year. The bulk of fee revenue came from the institutional book of business.
Parmenion
The third business in which the company is invested, and the largest financial commitment made so far, is Parmenion, a platform that was sold by Aberdeen Standard to private equity company Preservation Capital Partners, but the private equity house promptly sold 30 per per cent to AssetCo for an initial payment of just over £20m.
Ben Hammond, platforms director at consultancy Altus, says: “Parmenion is a bit differentiated from others in the market because it very much specialises in the investment management piece. There are portfolios an adviser can use, and can white label if that’s what they want.”
Mike Barrett, consulting director at the Lang Cat, says Aberdeen Standard never published separate accounts for Parmenion, but he says the typical destroyers of profit for platform businesses is usually technology problems and these have been absent from Parmenion.
He adds that Parmenion has consistently come near the top of satisfaction ratings with advisers, which he feels means the business will not have lost many customers to rivals in recent years.
Of the Parmenion stake purchase, Fleming says: “The appeal of Parmenion is that it has great technology, and an already existing great management team, and we think it is possible to grow a platform and to win clients from other platforms.”
David Thorpe is special projects editor of FTAdviser
