The acquisition of Cazenove Capital by Schroders is unlikely to impact Fitch's rating of Schroders Investment Management, currently at 'M1' Asset Manager rating and 'A+' Long-term Issuer Default Rating, the rating agency said.
The acquisition of Cazenove Capital by Schroders is unlikely to impact Fitch’s rating of Schroders Investment Management, currently at ‘M1’ Asset Manager rating and ‘A+’ Long-term Issuer Default Rating, the rating agency said.
Fitch said that the proposed acquisition will increase Schroders’ scale and capabilities in private banking and wealth management.
The acquisition also strengthens Schroders’ already well established presence in the UK intermediary business, with key additions in UK small and mid-caps, Multi-manager and absolute return strategies.
Growth in strategic regions such as Asia and US and client segments is now more likely to be organic.
In the agency’s view, the integration of Cazenove will be facilitated by a strong cultural fit between the two companies. Key Cazenove portfolio managers have been identified and incentivised to stay in the new structure. Cazenove’s investment processes and Front Office team’s organisation are not expected to change to provide continuity of service to investors.
Nevertheless, Fitch would expect some medium-term adjustments in the two UK Equities teams, following the impending departure of Schroders’ Head of UK Equities in June 2013.
Finally, Fitch expects Schroders’ scalable operational and technology platform to absorb easily the GBP5.8bn Intermediary assets that Cazenove managed as at end February 2013.
For comparison, Schroders net inflows in 2012 were GBP9.7bn.
“However, the proposed GBP395m cash consideration does not come without risks and would reduce Schroders’ surplus cash resources and investment capital buffer, albeit from a currently very high level and potentially partially mitigated by interim profits,” Fitch said.