F&C closes in on its Thames River acquisition

EVEN by the standards of F&C Asset Management’s long and winding history, the past year has been eventful.

The funds house, founded 140 years ago to manage the world’s first mass-market investment trust, made a long-awaited break for independence just over 12 months ago when it de-merged from life insurer Friends Provident. Analysts and employees breathed a sigh of relief as the cloud of uncertainty surrounding the company’s major shareholder dispersed. In the first quarter of this year, as if in celebration, F&C announced positive inflows for the first time in five years.

Chief executive Alain Grisay now has plenty on his plate as he looks out from the eighth floor of the fund manager’s offices off Broadgate. As well as preparing F&C’s interim results, which investors will scrutinise for any sign of a slowdown from the start of the year, Grisay is close to completing a £54m buyout of absolute return boutique Thames River. There is the impression of a firm stretching its legs after a prolonged spell of torpor.

“Thames River, once understood, will prove to be a propeller behind getting F&C to the right speed,” Grisay declares. “There is a bit of a lack of understanding, but the overwhelming amount of analyst reports are positive. It’s a great injection of talent – they are entrepreneurs, they are very driven by performance, they have a different way of looking at their funds.”

Charlie Porter, the outspoken Zimbabwean who built up Thames River, will stay in control of the unit. Thames River’s staff will continue to work from its West End headquarters and will keep equity stakes in the business. They are, says Grisay, fairly happy with the arrangement.

F&C’s investors appear less so. Shares in the institutional giant have fallen by nearly a third to 51.75p since the start of the year, affected by its considerable exposure to the euro through bond portfolios and the loss of contracts to manage funds including the F&C Eurotrust and the Pacific Assets trust.

Although F&C’s paper dropped the day the Thames River deal was announced, Grisay dismisses the suggestion shareholders are cool on the acquisition. “The market is generally sceptical at the moment, therefore unless it has a very clear story it’s not an automatic ‘buy’,” he says.

“I genuinely think what is happening with F&C stock at the moment is a lack of ‘must have’. What the market wants to see are net inflows. Now, we did produce that for the first quarter and we will update at our interims, but that’s what really matters.”

Grisay is confident the stock will be in for a “serious re-rating” once the market buys into the story being formed, partly through the Thames River bolt-on and partly through organic growth.

He will not rule out further purchases but says: “We are not going to be a serial acquisitor. None of that.”

In the meantime, F&C – like other fund managers – has to grapple with weak investor confidence. It also has an unwanted takeover battle in its backyard in the form of a proposed merger of the F&C Property Trust with Ignis Asset Management’s UK Commercial?Property Trust.

But those problems are manageable for Grisay, who appears to be enjoying F&C’s freedom from an overbearing parent.

“Corporate uncertainty kills your ability to grow,” Grisay says. “The moment you leave that, if you have the performance to support your claims, you’re in a different league. Which is what has happened.”