MMF business in the spotlight as Standard Life acquires Ignis

Standard Life Investments (SIL) has bought leading manager of local authority liquidity funds Ignis Asset management for £390 million.
In a statement to the London Stock Exchange on Wednesday, SIL said that it has entered into an agreement to buy the company with Ignis’s current owner Phoenix Group Holdings.
Ignis, with 360 employees spread between offices in London and Glasgow, manages around £1.5 billion of local authority assets in liquidity funds for some 250 councils.
Andrew Larkin, assistant client director at investment adviser Arlingclose, said Ignis had previously managed to win a large part of the local authority market due to the amount of money invested in the funds by Phoenix.
That relationship, he said, and understanding of the parent company’s cash requirements has enabled the fund manager to pursue a strategy with a longer than typical weighted average maturity which has produced attractive yields.
Larkin said of the deal: “One of the unknowns is how much of that cash from the parent will be going across.
“If none does then the strategy will have to change.”
Standard Life exited the MMF sector in 2011, selling £2 billion of sterling assets, €1.25 billion of euro-denominated assets and a small balance of US dollar assets to Deutsche Bank’s asset management subsidiary DB Advisors.
Larkin said that SIL’s purchase of Ignis was likely to signal a reversal of this strategy.
He said: “MMFs are a big part of Ignis’ business, so I would be surprised if they decided to buy the company only to get rid of the MMFs part of the business.”
A spokesman for SIL said that it was “too early to say” what the company’s strategy would be towards retaining Ignis’ MMF portfolio.
Keith Skeoch, chief executive of SIL, said: “Continuity of investment performance and commitment to client service and relationship management remain our key priorities, with migration and integration of Ignis taking place in a controlled manner under unified management from day one.”
Ignis is a top 15 asset manager in the UK with £59 billion of assets under management, excluding stock lending collateral.
It earned revenues of £150 million and generated EBITDA of £52 million in 2013.
SIL said that it has identified more than £50 million of cost savings from the integration of Ignis with its own operating platform, which will be achieved three years from now.
The transaction is anticipated to complete on or before 30 June 2014 and is conditional upon approval from the Financial Conduct Authority.