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A brave new world for bold Old Mutual

With last week&#39s acquisition of United Asset Management, Old Mutual has made a bold statement of its intention to become a major global fund manager.

The deal will see the company&#39s funds under management rise to around $275bn and makes it one of the world&#39s top 30 investment houses.

Since demutualisation last year, Old Mutual has grown at warp speed. After buying Gerard Asset Management this year, the company went on to bid for UK giant Gartmore but eventually pulled out as the price was pushed up.

Industry analysts believe it is more than likely it is in the race for Perpetual, an issue which is expected to come to a head this summer.

The UK is undoubtedly where the South African firm has the most work to do. The feeling about Old Mutual across the IFA market is decidedly lukewarm although most are aware that things are changing fast.

Chase de Vere analyst Justin Modray believes Old Mutual has not paid enough attention to the IFA market over the past few years and few IFAs are excited at the fund manager&#39s performance.

But Plan Invest director Michael Owen admits the future may be different. He says: “We have got Old Mutual on hold at the moment but are very aware of the significant backing they have got. They will undoubtedly be a company to watch in the next five years.

“They are in the same league as a number of promising growing asset management companies but they need something to get them going. They lack the kind of fund that jumps out and says buy me.”

In an effort to fill the void, Old Mutual has started on a recruitment drive, which last week saw the appointment of a whole team of new investment and marketing personnel from Hill Samuel, inc- luding star fund manager Ashton Bradbury.

Thirty-three-year-old Bradbury has seen only modest performance at Hill Samuel recently but such was his status four years ago that HSBC launched a fund for him when he was appointed to its UK smaller companies division.

Bradbury will work under Gerard Asset Management&#39s new chief executive and fellow Hill Samuel poach John Ainsworth. He will be alongside Peter Baxter, Fiona Hathorn and Adrian Farthing who were all heads of department for Hill Samuel.

The appointment of the new high-profile team may well produce the kind of fund that IFAs feel Old Mutual and Gerard are missing.

“We will take a conventional actively managed approach complementing the more quantitative asset management approach of Old Mutual Asset Managers,” says Ainsworth. “I am sure we will succeed and attract more talented fund managers into such an innovative business.

“With the longevity and corporate commitment of Old Mutual to Gerard Asset Management, I know we will be a major force in our chosen markets.”

Bates Investment is another IFA firm that has avoided Old Mutual but is now playing closer attention. Last month&#39s launch of a corporate bond fund has attracted IFAs.

Bates senior analyst James Dalby says: “Some of the bigger advisers have taken the corporate bond fund straight on board from launch, which is a promising sign. I think they are turning things around.

“The feeling I got from talking to them is that they are serious players and I do not think they will be happy until they are in the top five retail firms, so IFAs are going to be very important to them.”

The coming few months are to be a period of consolidation for Old Mutual while it gets to grips with the Gerard acquisition. Greig Middleton and Capel Cure Sharp are merging to form a new private-client business and this week will see the appointment of a high-profile chief executive for the new company.

Old Mutual is keen to build its relationship with intermediaries and reassure people that expansion has not left it forgetting its roots.

Capel Cure Sharp communications manager Annette Wrigley says: “Some people see the acquisitions as all we are doing. It is a very important part of our business and there is clearly a bid to increase Old Mutual&#39s position as an asset management company. But equally we are growing organically.

“We also want to make it clear that we are not just an asset management firm. We won&#39t be neglecting our traditional life insurance side.”

Ironically, as soon as Old Mutual settles down, it will have the acquisition of UAM to deal with and possibly further buys. In the face of the problems that Scottish Widows Investment Management has seen during its merger with Hill Samuel, consolidation is potentially something for a company to fear. However, Ainsworth sees the coming months as a challenge.

He says: “Many fund managers are increasingly disillusioned by the consolidation raging in the asset management industry. The challenge of developing an asset management business from strong foundations that can serve the needs of institutional, retail and private client business while retaining the fleetness of a boutique manager is unique – and was too good for us to overlook.”

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