Gresham House nabs Ken Wotton in Livingbridge deal

Baronsmead VCTs also transfer in the £30m acquisition

Livingbridge

Asset manager Gresham House has acquired the Livingbridge UK funds business, including its VCT business and two open-ended products managed by Ken Wotton (pictured), for an initial amount of £30m.

The deal, which could rise to £40m depending on performance, will bring Gresham House’s assets under management (AUM) to over £2bn.

It will include the Livingbridge Microcap and UK Multi Cap Income funds, managed by Wotton, plus the Baronsmead Venture Capital Trusts (VCTs). Wotton joined Livingbridge in 2007 and is the lead fund manager of the two funds, which have consistently delivered top-quartile performance in their respective sectors.

Measures in place to avoid disruption

Darius McDermott, managing director at Chelsea Financial Services said he rates Wotton “very highly” and supports both funds.

McDermott contacted Livingbridge on the news of the acquisition and said he has been reassured that the takeover will not affect Wotton’s investment process and his access to information from the rest of the team which has historically been a big part of their process.

He added: “So much so, that as part of the deal special provision has been made to ensure he continues to have access to the unlisted part of the business and continues to sit on the same investment committees.”

The transfer over to a new owner always has the potential to cause disruption within any team but most asset management group’s will look to mitigate any risks ahead of a deal being agreed, said Willis Owen’s head of personal investing, Adrian Lowcock.

In a trading update, Gresham House confirmed all 16 employees at the fund management businesses of Livingbridge VC, comprising 8 specialist investment and research professionals alongside 8 distribution, finance and operational staff, will join the company.

“Whilst there are no guarantees there won’t be any impact on performance I am not concerned as the combined entity should offer more resources and expertise the managers across all funds,” Lowcock said.

The Livingbridge funds

The Livingbridge UK Micro Cap launched in 2009 and has £163.92m. It has outperformed the IA UK Smaller Companies sector on a one year, three year and five year basis, with returns of 9.5%, 48.7% and 101.4%, versus -1.4%, 36.2% and 59.5%, according to FE.

Meanwhile, the Livingbridge UK Multi Cap Income fund launched in June 2017 and has £25.61m AUM. Over one-year, it outperformed the IA UK Equity Income sector with returns of 4.8% against -2.9%.

Lowcock said Wotton has a good track record and takes a “pragmatic approach” to investing, often screening out high risk areas, highly leveraged businesses and cyclical stocks.

“This leads to defensive approach to investing in micro caps which is sensible given the risky nature of the sector.”

Baronsmead VCTs were pioneers

However, Jason Hollands, managing director at Tilney said the change of ownership of the Baronsmead VCTs will surprise advisers, as they have long been perceived as part of the DNA of Livingbridge.

“The businesses was a pioneer in the VCT market, having been involved in it since the inception of scheme.

“The VCT market has undergone considerable change over the last three years, driven by changes to the rules in the November 2015 and 2017 Budgets in particular. Management buy-outs, a deal type Livingbridge specialised in, are no longer permissible and new risk tests raise the bar considerably for getting asset back deals approved, which is a challenge to other VCT groups.”

Gresham placing funds acquisition

The acquisition will be funded by a placing of new shares in Gresham House, as well as existing cash reserves.

The placing has raised approximately £11.7m, with Canaccord Genuity acting as financial adviser, nominated adviser, joint broker and bookrunner and Jefferies International as joint broker and bookrunner.

Completion of the acquisition is expected to occur on or around 30 November 2018.

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