Assetco’s acquisition of Saracen Fund Managers should help the ailing fund group realise its growth potential, given asset management dealmaker Martin Gilbert’s involvement, according to fund buyers.
On Friday, Assetco, the former fire-engine leasing business chaired by Gilbert (pictured), announced it was buying Saracen in a deal worth £2.75m.
The purchase, conditional to FCA approval, is expected to occur by the end of September and will result in the issue of 166,904 new ordinary shares of 10p each in the company and £664,774 in cash to be paid on completion.
Assetco deputy chairman and chief executive Peter McKellar said Saracen was chosen for its “great potential”, adding “its business model, people and product offering are its key assets and are an ideal fit for Assetco”.
Saracen is an Edinburgh-based asset manager with about £120m assets under management and a team of five, including former Brewin Dolphin chairman Jamie Matheson, Graham Campbell, David Clark and Bettina Edmondston. All employees will enter new employment contracts on completion of the sale.
Opportunity to unlock potential
McKellar said Assetco would build on Saracen’s strong foundations and “grow the business through marketing its existing funds and over time broadening its product range to continue to meet the needs of customers”.
Chelsea Financial Services managing director Darius McDermott said the acquisition will be an opportunity for Saracen to “unlock the potential it has shown” as it has a “small but good range of funds, but has struggled to get to scale so costs have remained high”.
Fairview Investing director Ben Yearsley said: “Saracen had really gone nowhere during the last decade, or certainly that’s the perception, so Martin Gilbert being involved should help propel them.”
AJ Bell head of active portfolios Ryan Hughes said the deal will “hopefully be seen as a chance to kick start the business which has struggled to gain traction in recent years”.
Value tilt has caused firm to struggle until recently
Saracen currently has three funds, the £103m Global Income and Growth fund, the £14m UK Alpha fund and the £2m UK Income fund.
The Global Income and Growth fund has lagged its peer group, returning 9.7% over three years, compared with the IA Global Equity Income average return of 23.1%, but has picked up recently with returns of 32.7% over one year, better than the sector returns of 25.1%.
Hughes said the fund’s value tilt meant it struggled until recently, while team turnover has also been an issue with both Scott McKenzie and David Keir both leaving the firm.
Assetco poised for further acquisitions
The acquisition will be Assetco’s first since Aberdeen Asset Management founder Martin Gilbert (pictured) was named as chairman. His arrival coincided with a shift in strategy to focus on “acquiring, managing and operating asset and wealth management activities and interests”.
In January, Assetco acquired a 2.9% stake in River & Mercantile, which it doubled the following month to bring its total share capital of the asset manager to 5.6%. Gilbert was also named as vice chairman of River & Mercantile in January.
Yearsley said: “The intriguing question at the moment is how River & Mercantile fits into the mix as Martin is non-executive director there.”
Hughes said given Gilbert’s track record of acquisitions during his long tenure at Aberdeen, “it’s possible we will see a number of purchases in future months”.
He added: “Asset managers that are sub-scale and struggling to grow may well see attraction in Gilbert’s reputation for growth and as Assetco grows, the opportunities to potentially drive synergies out of smaller managers could become an appealing option.”
Gilbert was caught up in a peculiar row with his former employer Aberdeen Standard Investments resulting in him voting against his own appointment as Assetco chair last month.