Discussions are said to be at an advanced stage regarding the Glasgow-based asset manager, with details expected in Phoenix’s annual results, published to the market on Wednesday (26 March).
A statement from Edinburgh-based Standard Life said: “Standard Life… confirms that it is in exclusive and advanced discussions with the Phoenix Group regarding an acquisition of Ignis Asset Management. Discussions are ongoing and there can be no certainty that any transaction will be agreed. Standard Life plc will make further announcements if and when appropriate.”
Lion's share in fixed income
Standard Life’s asset management arm, Standard Life Investments is responsible for £184.1bn of assets under management. A successful acquisition would see it pick up Ignis’ £67.7bn including strong franchises in absolute return bond and property funds.
Bestinvest managing director – business development and communications Jason Hollands said the deal had an element of déjà vu, reminding us that Standard Life bid for Clive Cowdery's Resolution when it was on the verge of a merger with Friends Provident, which was then "pipped to the post" by Pearl (later renamed Phoenix).
"If Standard Life is successful in its bid for Ignis, it will de facto be acquiring the right to manage some of the assets it had sought to acquire seven years ago, as well as additional funds," he said.
Hollands made the valid point that Ignis' core focus in recent years has been moving away from the retail sector and towards the management of running the insurance books of closed life funds. Of the £67.6bn, £51.4bn is in fixed income, he notes.
"While fee rates for managing insurance portfolios are at the lower end of the asset management spectrum, and therefore it would be wrong to compare any price paid as percentage of AUM against other deals in the industry, profit margins can be high as it is a high volume activity. Fusing large volumes of fixed income assets onto a single investment platform and removing cost duplication would likely offer the prospect of very high operating margins."