Why are independent asset managers so popular? Tuesday 22 Sep 2015

Why are independent asset managers so popular?

Independent asset managers have more than doubled the amount of assets they manage, as a raft of mergers and acquisitions has shaken up the industry over the past decade.

According to the latest annual survey by the Investment Association, independent managers such as Majedie and Schroders managed 41% of all assets at the end of last year, compared to just 15% in 2003.

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The driver for this was undoubtedly the rise of M&A activity in the industry, which has increased significantly over the past couple of years. The number of asset managers owned by insurance companies has also shrunk, which helps explain the shift towards more independents.

Recent examples of companies that sold subsidiary asset management arms include the sale of Ignis Asset Management by its insurance company parent to Standard Life Investments (itself an insurance subsidiary), and the sale of the US asset management arm of Old Mutual Global Investors..

Aberdeen Asset Management has also been increasingly acquisitive. The firm bought Scottish Widows Investment Partnership (SWIP) from Lloyds Banking Group in 2013, and last week the group announced its fourth acquisition this year.  While acquisitions such as these have driven new assets to independently owned firms, the elusive concept of 'trust' has also helped them to grow.

Investors feel more secure investing their money with independents as they know they are less likely to be sold off by the parent; have a more transparent and focused culture; and there is also less chance of a conflict of interest.

In contrast to the growth of independent managers, the number of boutiques within the industry has declined, according to the Investment Association.

The report again states consolidation as a key cause of this trend. Current examples include fund buyer favourite TwentyFour Asset Management, which is in the process of being taken over by Swiss firm Vontobel.

This does not mean investors are losing interest in boutiques however, as TwentyFour had to restrict inflows into its Dynamic Bond Fund this year.

But more money is flowing into the hands of the largest players acquiring the smaller firms.

Should investors be concerned by this shift? In a word, no. After all, the model employed by Legg Mason of leaving its subsidiaries to manage money largely independently, with their company culture undisturbed, appears to be becoming more prevalent.