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Comment: Parmenion is caught up in consolidation crossover

Comment: Parmenion is caught up in consolidation crossover

There has been such a level of consolidation in the investment management market in the last few months the big rivals are starting to cross commercial paths. Now it looks like discretionary fund manager and platform Parmenion is caught in the midst of a tussle between two investment giants, Standard Life Aberdeen and Old Mutual Wealth.

In January 2016 Parmenion was bought by Aberdeen Asset Management which yesterday completed its merger with Standard Life to create a company with £670 billion of assets under management. 

Parmenion now finds itself part of Standard Life Aberdeen while running money for Standard Life's rival Old Mutual.

The history

Back in 2012 Parmenion struck a deal with network Caerus to build and run a range of risk-rated model portfolios for the firm. Parmenion now manages around £1 billion of Caerus assets.

Parmenion reported it had £3 billion of assets under management in January so that puts what it manages for Caerus at about a third of the total assets.

Since Standard Life and Aberdeen they were joining forces, Standard Life’s old market rival, Old Mutual Wealth, has completed its purchase of Caerus via its own network, Intrinsic.

New Model Adviser® revealed the deal was underway in December 2016, it was officially announced in February and completed in June.

So Parmenion is on its way to being part of the Standard Life Aberdeen empire while still managing £1 billion of assets held by an Old Mutual Wealth-owned company. 

Asset mix

However, industry figures have claimed this as an untenable situation for a number of reasons.

One figure from the asset management sector explained there could be no way Intrinsic would leave the assets where they are, being managed by Parmenion, when the figure represents such a large part of the value of Caerus.

You can only wonder how Standard Life Aberdeen is viewing the inevitable prospect of losing a third of the assets from one of their platform companies. (With AXA Elevate, Standard Life Wrap and Parmenion they own three platforms now.)

On the other hand, it might be knocked from the top of their list of things to consider by other more pressing challenges that come with merging two mammoth companies.

From Old Mutual Wealth's perspective, it has bought a network with at least 300 advisers and £4 billion of assets under advice. It has stated how this will be useful peg in its vertically integrated model.

In last week’s financial statement for the first six months of 2017 Old Mutual Wealth said Caerus brought with it £1.2 billion of funds under management and helped boost the numbers of Intrinsic's restricted financial planners 11% to 1,582 as at 30 June 2017, from 1,423 at the end of 2016.

As things stand Old Mutual Wealth will continue to gain from its acquired contract with Parmenion.

New Model Adviser® understands, the deal between Caerus and Parmenion was 50:50, so managed portfolios bring in around 20-25 basis points for both parties.

It does mean Old Mutual Wealth has the opportunity to double its revenue from these assets by moving the managed portfolios into its own investment propositions. 

Old Mutual Wealth and Parmenion declined to comment on the commercials of the deal.

New Parents

The other option of course is that Standard Life Aberdeen decides to sell Parmenion.

So far, however, the signals have been cool on this idea. In May Aberdeen chief and now co-chief of the new business Martin Gilbert backed Parmenion to lead the asset manager's transformation into a 'fintech and digital revolution'. He also told Citywire Aberdeen had bought Parmenion to learn about robo-advice and it 'had turned out to be a better investment than we thought'. Though he added it was crucial to resist integrating the business too closely in order to avoid 'wrecking' it. 

Standard Life recently stated it is ‘looking forward to working with Parmenion when the proposed merger completes.’ 

Parmenion declined to comment.

Now the merger is legally tied up, how will the new entity solve the problem of Parmenion and the risk of an asset migration to Old Mutual Wealth?

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