With a sale process for Artemis now reportedly underway, staff and shareholders in the company may ponder two sliding doors moments in recent years that could have materially altered the outlook for the long-established asset management firm.
The first such moment was when Artemis management offered to buy emerging market fund house Somerset Capital in 2019.
Somerset Capital later lost one of its co-founders to a political career, and subsequently its largest client, St James Place, and wound itself up.
The second was when, around two years ago, Fenchurch Advisory Partners was appointed by Artemis “to explore strategic options” for the company.
That was at a time when private equity buyers were circling asset managers, and there was some interest, but nothing was consummated Offically Artemis said at the time the company was not for sale.
No transaction occurred, and since then the valuations of stock-market-listed asset management companies, against which Artemis can be compared in valuation terms, have declined.
Artemis is 60 per cent owned by US firm Affiliated Managers Group, with the other 40 per cent in the hands of around 30 current and former Artemis employees.
But as the sale memo is distributed around the City, what sort of business is a potential purchaser getting, and what could the future hold for Artemis?
One wealth manager, speaking anonymously to protect business relationships, tells FT Adviser he is “surprised” that Artemis is for sale now, “because I think Artemis as a company is really starting to turn around.
"Two years ago, that business was on its knees, but a combination of improved market conditions and the success of their fixed income franchise means it has turned around."
Show us the money
As the chart below shows, at the end of December 2023 the assets under management of Artemis UK wholesale and retail fund range was £17.4bn.
This is a fall from two years prior, at the end of 2021, when this book of business was closer to £20bn in size, with an additional £10bn or so in institutional money, according to data from Morningstar, obtained by FT Adviser.
When FT Adviser's sister publication Asset Allocator sourced the same data in 2021, the companied number was £30bn.
Of course, most asset management firms have seen their AUM decline since the start of 2022, as market conditions and higher interest rates have taken a toll.
That £17bn figure excludes assets run by Artemis for institutional investors, clients in EU-domiciled funds, and within investment trusts.
When those assets are included, the AUM of the company is around £22bn. Artemis state that at the end of March the total assets under management was £24.7bn, with £5.1bn of that institutional.
The investment trust division suffered a blow in 2023 when the board of the Mid Wynd Investment Trust, a £400mn vehicle, removed it from Artemis, following the exit of its fund manager, and chose Lazard instead.
Darius McDermott, investment adviser for the VT Chelsea Managed Funds range, is a fan of the Artemis fund range, saying: “We are big fans of Artemis and have been for a long time.
"Historically known for UK equities, but they have diversified their range over the years with, for example, US equities, global SRI and more recently the fixed income team. They have now got a strong set of funds for fund buyers to choose from.
"In our fund of funds we own Artemis IG, Target Return Bond, High Yield and also UK Select."
Jason Hollands, managing director for corporate affairs at Evelyn Partners, says: “Culturally, Artemis is essentially a ‘big boutique’, where each investment team has a lot of autonomy in developing their investment approach rather than being corralled into a single house process or style.
"Among the Artemis fund range, we particularly like the Artemis UK Select fund, managed by Ed Legget and Ambrose Faulks, which is a multi-cap ‘best ideas’ fund that targets undervalued growth companies. Another strong Artemis capability is credit – we like the Artemis Corporate Bond fund, managed by Stephen Snowden.”
Liontrust recently negotiated to buy Artemis, but a deal was not completed. McDermott’s highlighting of scope for Artemis to diversify is something Rory Maguire, managing director of Fundhouse UK, notes too. He says part of the issue with Artemis is what he calls “franchise risk”.
This is the fact that a large proportion of the AUM at the company is run by a small number of individuals, and that if either the manager leaves, or the asset class falls from favour, it can have an outsized impact on the wider business.
As the chart above shows, around £9bn of the £17bn in UK wholesale and retail assets is run by just three lead managers: Adrian Frost, Jacob De Tusch-Lec, and Ed Legget.
The first two of those are industry veterans and material shareholders in the company. The funds they run have performed strongly in recent times, most being top quartile, as the value style of investing comes back into vogue.
Another wealth manager, who spoke on condition of anonymity, says one of the issues with Artemis is that, with the exception of some managers that have been at the helm almost since the company was founded, he feels new fund managers have yet to emerge within the business, and wonders why.
One of the challenges this poses for the firm is that if a partner wishes to retire from the company, the usual practice is for a younger employee to buy the retiring partners shares, but if the younger employees have yet to become lead fund managers they may not have the income to do this, leaving retired partners continuing to have influence on the firm.
Liontrust recently negotiated to buy Artemis, but a deal was not completed.
Artemis as a business reported a profit of £79mn for the year to the end of 2022, with the total number of employees being 181.
That profit number was significantly down on the £101mn delivered the prior year, with the company stating that the depressed stock market conditions of that year contributed to the lower AUM, and therefore revenues.
Artemis is a firm with many very big personalities, and products that are very popular among advisers and clients, so the fate of the firm is likely to interest advisers in the months ahead.
David Thorpe is investment editor at FT Adviser
