Fund buyers also need to take the profile of the merging firms into account.
Philbin adds: “Ultimately it depends on whether there is overlap or fit. For instance, with the Aberdeen and Standard merger, there are obvious areas of overlap – multi manager for instance and property franchises. But SLI have GARS and Aberdeen don’t, so there is likely to be less disruption in this space. Of course, there can be political issues which means the best manager from the two combining firms doesn’t always get the obvious job.”
Husselbee says: “There’s always the concern that bringing two companies together may erode the cultural values of what made them unique in the first place – but, taking Standard Life Aberdeen (disappointingly not named ‘Stanli Deen, as I’d hoped!) as an example, I cannot imagine Hugh Young or Harry Nimmo will suddenly ditch the processes they’ve spent decades building.”
Yousefian says for IFAs it is extremely difficult to construct a portfolio taking the potential for mergers and acquisitions fully into account, but they do need to be cognisant of the risk.
He adds: “The bottom line is as long as it is not to the detriment of the product they have selected and the fund managers who run the product, then given that all fund managers live and die by their performance, it should be fine.
“Having said that, the mere risk of a merger can create uncertainty. It should be more of a concern for smaller and medium sized houses who may become the prey for larger houses. It is a fact of life. You can’t rule it out.
“One thing is to do as much due diligence as you can, to look at the investment house, their resources and where they are within the market. You can ask them some direct questions about their resources and how they see the industry developing. Due diligence does need to go a little bit beyond the product and the fund manager. But you can’t make it a definitive factor that would rule out a fund manager.”
Philbin suggests that significant disruption aside, mergers are less of a problem than the merging firms may fear.
“Having worked through a number of mergers involving Friends Ivory & Sime, Royal & Sun Alliance, ISIS and F&C, the concern is felt much more when you work for the company, rather than as an outsider looking in!
“As a fund selector, we can always, easily, take our assets elsewhere. I remember being on a number of roadshows and the sales team having slides discussing the mergers, and the clients not really bothering too much.
“All they need to know is what is happening to the funds they are invested in and who will be managing them.”
