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FTSE 250 asset manager Liontrust has approached smaller London-based rival Artemis about a potential takeover, as mid-sized asset managers continue to combat mounting pressures sweeping the investment industry.
Liontrust recently held early-stage discussions with Artemis about a potential tie-up, according to three people familiar with the situation. Another source said that the talks were no longer ongoing. Liontrust said it was “not in talks with Artemis about acquiring its business.” Artemis declined to comment.
The talks between Liontrust, which has £27.8bn of assets under management, and Artemis, an independent firm overseeing £23.4bn, come as the UK fund management industry faces multi-year headwinds.
Increased regulation is increasing the cost of doing business, eroding margins at a time when many clients are withdrawing their money from funds managed by stock pickers in favor of cheaper passive funds that track the index. This leads to consolidation in the industry as managers resort to mergers and acquisitions to increase scale, reduce costs and pursue new customers or growth areas.
Under chief executive John Ions, Lion Trust has bought seven asset management shops in 12 years, as he seeks to diversify the business beyond its roots in UK growth stocks. This includes the £40m acquisition of Neptune in 2019, and a £120m deal for Majedie Asset Management in 2022.
But successfully combining fund management businesses is difficult, and Liontrust's mixed acquisitions track record shows how dealmaking is neither a panacea to industry challenges nor a guaranteed catalyst for growth.
Liontrust's share price has fallen more than 70 per cent since its peak in September 2021. It suffered net outflows of £4.8bn in the 12 months to March 31, and investors withdrew another net £4.9bn of its money in the months Nine until December 31. Its total assets at the end of last year amounted to 27.8 billion pounds sterling, down. 15 percent over the previous year.
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The discussions with Artemis come just over six months after Liontrust's bid to buy GAM for £96m in an all-stock deal failed. At the time, Ions said the GAM deal would “create a global asset manager, well positioned for long-term growth.” But he failed to convince the Swiss asset management company's shareholders, who rejected the offer on the grounds that it undervalued the company.
Artemis is owned by 27 partners – including fund managers and key individuals at the firm – and US investment firm Affiliated Managers Group, which bought a majority stake in the company in 2010. AMG takes a share of Artemis' revenues but has no involvement. In daily business management.
While GAM would have provided Liontrust with a global distribution network, Artemis' distribution strength lies in the UK. Popular UK equity funds include the £4.5bn Artemis Income fund, managed by Adrian Frost, Nick Shenton and Andy Marsh.
AMG, which buys stakes in alternatives management firms and mainstream asset managers, did not respond to a request for comment.
Additional reporting by Sally Hickey
