It’s not just about Buxton: why Schroders needs Cazenove Capital

On paper Schroders and Cazenove Capital looks like a great fit.

After Wealth Manager revealed the duo were in talks this morning, forcing a Stock Exchange announcement from both firms, the rationale for a link between the two started to make a lot of sense when examining the finer detail.

Instinctively, reaction was that Schroders was simply looking to access a top UK equity team following the shock news that Richard Buxton, along with two of his team, was defecting to Old Mutual Global Investors.

In Cazenove Capital, Schroders are certainly getting that, with Citywire AAA-rated Julie Dean, Paul Marriage and Matt Hudson all at the top of their game.

But there is much deeper logic to this potential acquisition.

Cazenove Capital has £18.7 billion in assets under management with around £5.8 billion held in its investment funds business. It also has a £250 million hedge fund business and an alternative Ucits business with around £1 billion.

‘Bringing this expertise to Schroders would add scale to its alternatives business, in our view,’ said BofA Merrill Lynch Global Research .

However, it is important not to overlook the draw of Cazenove Capital's wealth management business, which controls almost £13 billion in assets.

In its full year numbers released earlier this year, Schroders chief executive Michael Dobson (pictured) lamented at the poor performance of its private bank, which saw profits plunge in 2012.  

‘This potential deal will increase the scale and viability of Schroders private banking business, BofA Merrill Lynch said. ‘Given the mixed performance of the private bank, we believe a shot in the arm would be welcome.’