Liontrust could beef up its exposure in areas such as US and European equities as part of a reported deal whereby it would acquire the vast majority of Neptune’s business.
Liontrust confirmed on Monday morning that it was in discussions with Neptune but stressed that at this stage there was no guarantee a deal would go ahead.
Merian Global Investors, which was rumoured to be a likely takeover candidate, passed on buying Neptune, according to the Sunday Times, which first broke the news of the Liontrust deal over the weekend. A source told the paper Neptune is worth £25m and Geffen is hoping to get more than this for the investment firm he founded in 2002.
Merian told Portfolio Adviser it does not comment on rumour and speculation.
Flogging to a few ‘merry bands’ of IFAs
Geffen is reportedly intending to hold onto his funds while selling off the remaining strategies, including the US and European equities funds, which he has no connection to.
This gels with what a City insider told Portfolio Adviser about the proposal on the table. Under this scenario they said probably very few people would be kept on, leaving Geffen to “keep his little franchise in Hammersmith and flog to a few merry bands of IFAs”.
Geffen declined to comment on the proposed structure of the deal.
The Neptune CEO is listed as the lead manager on six strategies on Trustnet, including the £429m Neptune Balanced and £283m Neptune Income funds. He recently appointed his 24-year-old son William Geffen to serve as assistant fund manager on three of these mandates, despite him only joining the firm as a graduate last year.
Neptune/Liontrust fund mergers
AJ Bell head of active portfolios Ryan Hughes said that any M&A move would help broaden Liontrust’s fund range but said a deal with Neptune could be easier to rationalise and less messy given many of its funds have “limited following”.
“I think it is fair to say that many of the Neptune funds have limited following these days and there would be some opportunities to merge away some of the funds where there is overlap,” he said.
Hughes noted the proposed takeover of Neptune is the latest in a long line of M&A activity as small and medium sized asset managers struggle to grow organically. “And it may not be the last that we see should the landscape for active managers continue to prove to be difficult.”
Strengths in US and Europe would be complementary
Willis Owen head of personal investing Adrian Lowcock said that news Liontrust is the potential buyer “feels about right,” as the London-listed fund group has been growing successfully for several years now. “The size of the two businesses makes this a good fit”.
Lowcock said that acquiring Neptune’s European and US products and expertise would complement Liontrust’s existing setup.
“Whilst Liontrust has some European funds, it is better known for its flagship UK funds and more recently its sustainability funds,” he said. “The additional assets and expertise do fit well with Lionstrust as does the introduction of a US fund and this would add resources as it looks at its next phase of growth.”
Liontrust has been highly acquisitive in recent years, snapping up Alliance Trust Investments in 2017 and before that Occam in 2011 both of which have boosted AUM and expanded its reach in sustainable investing and emerging markets respectively.
It has also attracted some star talent over the years, acquiring John Husselbee and Paul Kim after it purchased North Investment Partnership in 2013 and luring Kames Capital fixed income duo David Roberts and Philip Milburn.
Meanwhile Neptune has slid in the other direction, watching assets under management shrink and a flood of senior managers exit the business, including distribution head Charlie Parker and senior European Opportunities manager Rob Burnett, who left the firm after 16 years to start his own business.
It has also struggled to retain managers on its US equity desk since team leader Felix Wintle stepped down in May 2016 with the £238m US Opportunities fund changing hands four times since then.
