Liontrust has reported its assets under management (AUM) hit £14bn in the second quarter, but concerns have been raised about its concentration risk as its economic advantage team manages close to 50% of these assets.
The asset manager’s AUM was up 11% over the period from £12.7bn at the end of Q1. Net inflows for the period reached £725m, more than double that of the same period last year (£320m).
However, in a report published less than a week ago, Peel Hunt analyst Stuart Duncan, said in an apparent reference to the Woodford Equity Income fund suspension: “Recent events in the asset management sector reinforce the inherent risk that investors face: the reliance on certain key individuals or products.
Peel Hunt analysis suggested Liontrust had the largest concentration in a single-strategy manager with the Economic Advantage team managing 49.3% of AUM. While the report noted the assets were managed by a team, it said Anthony Cross (pictured) was closely linked to the success of the fund.
Cross works alongside Julian Fosh, Victoria Stevens and Matt Tonge.
Gervais Williams was named as a similar key man risk at Miton, despite being part of a team.
Sustainability and fixed income teams provide diversification
Chelsea Financial Services managing director Darius McDermott pointed to the fact Cross has worked for over a decade with Fosh, his co manager.
“They have expanded the team in recent years so although there is some key person risk, it is not as bad as it looks. Also, Anthony is not near retirement age so there should be no issues on the horizon.”
Liontrust has been working hard under the leadership of John Ions to add new teams and raise assets for them, McDermott said, pointing to the Kames team that was brought on to manage fixed income, which has raised £500m in a short period of time.
BMO Gam multi manager Scott Spencer likewise pointed to the sustainability team.
Polar tech team also represents concentration risk
The Peel Hunt report also named Polar Capital as a boutique with key man risk singling out the technology team of Nick Evans and Ben Rogoff, who manage a third of assets.
The asset manager, similarly sized to Liontrust, reported today that AUM had reached £14.7bn compared to £13.8bn at the end of March 2019, an increase of 6% over the quarter. Of that, £150m were net inflows and £727m were related to market movement and fund performance.
Spencer said: “For all listed asset management firms, diversification is important and can influence the share price. Reliance on a key product can bring its own issues even if the manager does not leave.”
McDermott added: “My understanding is that Polar are a pretty diversified business with big franchises in Japan, Tech, Healthcare, financials to name a few. We highly rate their healthcare team and global insurance.”
