M&G, the UK’s third-biggest listed fund manager by assets, has agreed to buy a £14bn adviser platform from insurer Royal London as the newly independent group seeks to tighten its hold on the retail savings market.
The acquisition of Ascentric, which brings relationships with 1,500 advisory companies serving more than 90,000 investors, will allow M&G to sell its funds and insurance products to a wider pool of retail savers.
M&G already distributes its funds via advised platforms in the UK but the deal to buy Ascentric will be its first foray into owning a platform. Several of its rivals already do so, such as Standard Life Aberdeen, Britain’s largest listed fund group by assets, through its Elevate and Standard Life Wrap platforms.
The Ascentric acquisition, which is still subject to regulatory approval, will also provide M&G with the capability to provide discretionary fund management which will help it push into the lucrative wealth management market. It comes as asset managers are increasingly venturing into that area as they eye higher fees and more loyal clients. Schroders, the UK’s biggest listed manager by market capitalisation, recently launched a joint wealth management business with Lloyds Bank.
Shares in M&G jumped by 10 per cent in morning trading on the news. M&G did not disclose the financial terms of the acquisition — its first since listing on the London Stock Exchange last year — but said the price was not material to the company.
“This deal strengthens our position in the UK savings and investment market, complementing our existing offering to advisers and customers with a well-established digital wealth management platform,” said John Foley, chief executive.
Gordon Aitken, an analyst at RBC Capital Markets, described it as “a solid strategic move” for the group.
The announcement came ahead of M&G’s first annual general meeting as an independent company on Wednesday. It was originally part of Prudential, but was spun off last year as part of a demerger of the group’s UK insurance and investment business.
The company has had a turbulent few months, losing a third of its stock market value since its October float. Its problems have been further exacerbated by the upheaval to global markets caused by coronavirus, which reduced its assets under management and administration from £352bn to £323bn in the first quarter.
Despite this, M&G told shareholders it would uphold its promise to pay an ordinary dividend of 11.92p and a 3.85p special dividend, bucking a trend among UK insurers to scrap their payouts.
The group said its shareholder Solvency II coverage ratio — a yardstick of balance sheet strength — remained “comfortably above our risk appetite” throughout the crisis, standing at 168 per cent at the end of March.
The Ascentric acquisition is expected to close by the end of the year. Ascentric chief executive Rob Regan will initially remain in place but the platform will eventually be integrated into M&G’s business.
Royal London chief executive Barry O’Dwyer, who began a strategic review of Ascentric after taking the reins at the insurer last year, said that the sale of the business would take it to “its next phase of growth”.