U.K.-based specialist equities fund manager RWC Partners has swallowed up rival Pensato Capital for an undisclosed sum, in a move that brings its total assets to $12 billion.
The entire investment team at Pensato and its Europa, Europa Absolute Return, and European Equity funds will now pass to RWC Partners, which is 43 percent owned by fund group Schroders. Among those transferring is Graham Clapp, who is best known for running Fidelity’s €25 billion ($28.5 billion) European Growth Fund for 22 years until he left in 2008 to found Pensato.
Dan Mannix, chief executive of RWC, tells Institutional Investor that while the company is not disclosing what it paid for the business, it will result in a “long-term pay-out” for Clapp and the other transferring fund managers who hold a stake in Pensato. The deal came about after Mannix met the firm’s team at the beginning of the year and RWC’s non-executive chairperson Nicky Richards subsequently endorsed Clapp’s investment approach, having worked with him previously at Fidelity.
“It has taken us six months to get to the point where we are signing. With the teams that we bring into RWC today, our conviction has to be very high,” says Mannix. “The best sources of real insight are from people who have worked for or been a client of someone.”
Mannix says further endorsement of Clapp came from Peter Clark, a board director at RWC Partners who had encountered the fund manager while he was the chief executive of MAN Group and Clapp was an investor in the hedge fund firm.
Pensato originally launched with a long-short equity fund in 2008, but market conditions proved to be unfavorable for the strategy, and a subsequent long- only strategy never achieved the scale for which the business had hoped. Mannix says he thinks the legacy Pensato funds will benefit from RWC’s relationships with advisers and consultants.
The acquisition comes as asset management groups to continue to consolidate as a result of pressure on client fees from passive competitors and an increasingly hostile regulatory environment in Europe. Last month, KPMG released a research report suggesting there is likely to be an increase in merger activity over the coming two years.
“Over the next 12 to 24 months, an uptick is expected in mergers and acquisitions from minority stakes to large scale M&A,” the report stated. “Consolidation and strategic partnerships will allow alternative investment firms to offer a more diverse range of products and strategies to investors, provide access to new distribution channels, and facilitate succession planning and the ability to retain top talent.”
RWC boss Mannix says the time has come for investment management directors to recognize that the industry is going through a cultural change that will have significant ramifications for the competitive landscape.
“What fund managers were paid to do five years ago, they are not going to be paid to do in five years’ time,” he says. “For the first time technology exists to create efficiencies, and pressure from clients means we need to reduce our prices. The status quo is not an option. You have to make profits.”
