SPLIT OF CORE BUSINESSES
Old Mutual subsidiary ready to purchase additional shares
Old Mutual Asset Management (Omam) has the firepower to buy additional shares from its parent in 2017, it said on Thursday, indicating a faster split was on the cards.
Insurer Old Mutual, which sold nearly a quarter of its interest in the US-listed asset manager in December, is in the middle of splitting its four core businesses including Nedbank and its emerging markets business.
"The company has the financial capacity to purchase additional shares from the parent in 2017, if such purchase is deemed to be an accretive and value-enhancing transaction," said Omam CEO Peter Bain.
Old Mutual sold more than 20-million shares to the public and Omam at the same time in 2016, with Omam snapping up 6-million shares for $85.5m as it conducted the secondary placing for its parent company.
Omam had $101.9m in cash at the end of December, its results for the quarter and year to December 2016 showed.
"Following the statement in the Omam presentation today that the financial capacity remains for potential additional buybacks from Old Mutual Plc during 2017, and after last year’s successful placement, this does imply that the sell-down of the Omam part of the managed separation process is progressing well," said Adrian Cloete, a portfolio manager at PSG Wealth.
He said the asset manager was well-placed to buy back its shares, as its assets under management increased 13.2% to $240.4bn during the year to December as positive market movements added $20.7bn and the acquisition of affiliates such as Landmark Partners provided a boost.
"Products representing more than 55% of revenue are outperforming their benchmarks with respect to investment performance on a three-and five-year basis," said Cloete.
In the 2015 year, products representing 83% to 92% of revenue outperformed benchmarks. Omam blamed the decline in investment performance during the year on "macroeconomic-driven volatility" and investors’ subsequent search for shelter in bond products in the first three quarters of the financial year.
The changes in investor demand was challenging for Omam’s affiliate investment boutiques, which employ long-term strategies.
Performance fees plunged 95.8% to $2.6bn.
Bain sees further growth for the company coming from its collaboration with affiliate investment boutiques, investing in new asset managers and funding further share repurchases.