Standard Life Investments has bought Ignis Asset Management from Phoenix Group for £390m to boost its institutional operations. The deal will be completed before the end of June, subject to FCA approval. Ignis will be merged with SLI, which Standard Life says will increase the division’s investment capacity.
Ignis is one of the largest 15 asset houses, managing £59bn. It made £150m in revenue last year, producing earnings before tax of £52m. The acquisition will make SLI one of the UK’s largest asset houses.
Standard Life expects to save more than £50m by its third year of ownership by bringing SLI and Ignis onto the same operating platform. One-off restructuring costs are expected to be about 1.5 times the annual savings.
Speaking to Money Marketing’s sister title Fundweb, SLI chief executive Keith Skeoch, says the Ignis deal will boost earnings through efficiencies between the two businesses. He admits there will be redundancies in the wake of the deal, but expects the combined group to continue increasing its staff in the medium term.
He says: “We have got a long and proud history of growing assets, revenue and profit, and you can only do that if you are continually reinvesting in the business, technology and people.
“You do not cut yourself to greatness. The fund management business is nothing more than people with technology applied. People are our most valuable asset.”
Skeoch says it is too early to discuss how the businesses will integrate. He says the biggest draw of the Ignis deal is that it comes with £44bn of institutional money from four insurance books, including the life companies of Phoenix.
That bolsters the £84bn that SLI already runs for Standard Life and other life insurance mandates.
Skeoch says: “We get critical mass and it is quite clear we are open for business for running investments for companies other than our parent.”
He sees opportunities for SLI as defined benefit pensions mature and insurers look to de-risk by outsourcing to investment managers. He expects this to be a “rich vein of growth” for the company over the next five to 10 years.
In a statement, Ignis chief executive Chris Samuel says: “I have been delighted with the progress the business has made since 2009 [when I joined].
“We have invested in talent and refocused, which has resulted in improved investment performance, net sales and profitability. Ignis is ready to move to the next phase.”
So what does the deal mean for Ignis’s retail funds after acquisition?
To be fair, most of Ignis’s asset base has come from institutional money and there has been little to write home about from its retail offerings.
The jewel in its crown has been the Ignis Absolute Government Return Bond fund. This fund will fit nicely with SLI’s GARS fund, which could lead to further domination of the sector, as all bases will be covered.
Apart from the absolute return bond fund, Ignis has little that SLI cannot match with its own fund range. Ignis UK Property has been gaining traction with investors, but SLI already has an established and experienced property team. So it is likely that any recognised capability within the Ignis property team will be taken on but that the fund’s assets will be merged with SLI’s existing funds at some point.
Ultimately, this is also the likely scenario for Ignis’s other retail funds. SLI has a strong equity and bond presence in the UK retail market. It is therefore likely that for any like-for-like products the Ignis funds will be absorbed into SLI’s offerings. But this is no bad thing for Ignis’s retail investors, given SLI’s broad expertise in managing funds.
Ben Willis is head of research at Whitechurch Securities