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Abu Dhabi, UAESunday 23 September 2018

Investec spins off asset management arm as founders depart

Shares jumped by as much as 13 per cent, the biggest increase since March 2009

The City of London skyline. UK-headquartered Investec spun off its asset management unit following a strategic review. Getty
The City of London skyline. UK-headquartered Investec spun off its asset management unit following a strategic review. Getty

Investec is spinning off its asset management unit after a strategic review found there is little synergy with its banking and wealth and investment divisions. The stock rallied the most in nine years.

Investec Asset Management, which oversees £109 billion ($143bn) across its offices in the UK, South Africa, Australia and the US, will be headed by the money manager’s founding chief executive officer, Hendrik du Toit, Investec said in a statement on Friday. The remaining businesses will be headed by Fani Titi.

The company plans to trade the money manager ’s securities in London with another listing in Johannesburg as Investec’s founding chiefs, Stephen Koseff and Bernard Kantor, prepare to step down next month after more than 40 years with the company. It follows a similar step by Deutsche Bank, which in March spun off its asset management unit, and a split by Old Mutual that broke up its UK wealth management and African banking and insurance businesses.

This is a “very positive” move that will help Investec Asset Management achieve a higher valuation than within the larger group, said Richard Hasson, a money manager at Electus Fund Managers in Cape Town. Investec Asset Management “has been one of the biggest asset gatherers as a percentage of their assets under management over the last 10 years so it really has been a good story.”

Shares in Investec jumped as much as 13 per cent, the biggest increase since March 2009, to 547.60 pence and were trading 8 percent up at 523.20 pence as of 9:16am in London. That pared losses this year to 2.2 per cent and values the company at £5.2bn.

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Investec Asset Management accounted for about a third of operating profit in the 12 months through March. The division will probably report earnings for the six months through Sept. 30 that will be “ahead of” the year earlier period, following net inflows of £4.4bn, Investec said in a separate statement.

Investec’s specialist banking division, which accounts for more than 70 per cent of its operating earnings, will also post better fiscal first -half profit than a year ago, mainly because of an improved performance from its UK business. Wealth and investment is lagging last year’s interim earnings, Investec said.

The separation of the asset-management unit will support the next phase of its development, Koseff and Kantor said in the statement. While the precise mechanics of the “demerger and listing” still need to be finalized, the company is hoping to complete within 12 months, subject to regulatory approvals, Koseff said on a conference call.

“It is like letting one of our children go,” he said. “We have been building this business with Hendrik for the past 28 years.”

The management of Investec Asset Management will retain their stake in the business, while Investec may keep a minority stake in the money manager, the company said. JPMorgan Chase and Fenchurch Advisory Partners are advising on the transaction.

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