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L&G saves a fortune by taking 25% stake in Cofunds

Legal & General has taken a 25 per cent stake in Cofunds in a move that will make the firm the fund supermarket’s biggest single shareholder.

L&G has paid 18.6m for the stake and the other five shareholders, IFDS, Gartmore, Jupiter, Threadneedle and Prudential, have contributed a total of 7m into the business as a sign of goodwill.

Cofunds chief executive Stuart Dyer says this will provide sufficient capital to see the company through to turning cash-positive between late 2006 and early 2007.

L&G signed a distribu- tion agreement with Cofunds last July that will see the insurer develop co-branded investment bond and pers- onal pension wrappers for the platform.

Dyer says the decision to buy into the business was a result of the close collaboration between the two firms.

L&G retail & investments director Simon Pistell says L&G needs an open-architecture platform to stay competitive and it was logical to invest in Cofunds rather than spending “hundreds of millions of pounds” on developing its own system.

The move follows recent moves by FundsNetwork to link up with Standard Life for Sipps and Norwich Union for investment bonds. NU also has a 70 per cent stake in Lifetime and Pru has an involvement in several platform operations.

L&G will have board representation at Cofunds but will not seek to replace current chairman, IFDS’s Char- lie Eppinger.

Pistell says: “It is a strategic decision for us because we know that advisers will use platforms more and more. We had the choice of build- ing our own for 100m-plus or working with another player and one of the major advantages of Cofunds is its independence.”

Dyer says: “This investment will take us well past our break-even funding requirements.”

Chelsea Financial Services managing director Darius McDermott says: “Legal & General is strong financially, well respected and the fact that they are now a majority shareholder is a major boost to Cofunds.”

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