Boutique asset manager Garraway has absorbed the UK and Ireland Ucits funds of troubled investment firm City Financial, totalling £240m ($317m, €281m) in assets, as it looks to diversify and expand its product suite.
The transfer was confirmed on Wednesday by Jason Baker and Geoff Rowley of FRP Advisory, who were appointed as the $1.2bn firm’s joint administrators late last week.
The deal will see Garraway add City Financial’s flailing absolute return fund, Absolute Equity, which has lost investors 37.25% over one year, and multi-asset range to its own Ucits stable. The joint administrators said the decision to transfer the entirety of City Financial’s Ucits assets to Garraway was done to protect underlying investors and ensure continuity for existing customers.
FRP Advisory is still in the process of finding a buyer for City Financial’s Hong Kong and Singapore subsidiaries but said it expects all sales to be completed shortly and will provide a further update in due course.
Garraway eyes growth
Garraway managing director Hiren Patel said acquiring City Financial’s funds is “a major step forward” that will allow the boutique business to build a diversified suite of funds under management.
Garraway currently manages three vehicles, including a UK equity and global equity fund, which have roughly £88m in assets between them.
Absolute Equity managers David Crawford and Ade Roberts and Mark Harris, who ran the multi-asset range, will remain at the helm of their respective funds at Garraway, the London boutique confirmed.
“A big part of this transaction is also about attracting both emerging and established fund manager talent who wish to benefit from our comprehensive support and stable platform,” said Patel. “We are really excited by this move and what it means for the future of our fund business.”
Uncertainty around Absolute Equity
Commentators have pointed out that while the transfer might help improve confidence for retail investors, it does not address the potential liquidity issues of the Absolute Equity fund.
Prior to its recent spell of bad performance, City Financial’s £146m absolute return fund had been a relatively high-profile fund in the sector. However, it was forced to temporarily suspend dealing on 4 March after it was unable to cope with a wave of redemptions following news of City’s financial difficulties.
Regulatory filings over the past two weeks show the fund was forced to cut down major stakes in seven different holdings before and after the fund ceased trading.
City Financial has previously declined to comment on the liquidity of Absolute Equity.
News broke earlier this month that the London-based investment firm had filed a notice of its intention to appoint an administrator with chief executive Robert Hain quoted in court documents saying the firm “is likely to become unable to pay its debts”.
The company’s accounts show that the firm reported a £16.7m loss in 2017 due to rising costs and that bosses Andy Williams and Hain, former Invesco colleagues who took over the business in 2006, had borrowed close to £4m from the business over several years.
Assets under management at the firm halved in 2018 from $3.3bn (£2.5bn) to $1.2bn after it was forced to shutter its Decca fund which fell 21% after making a bad call in volatile markets.
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