Skandia funds to fold into Intech after Old Mutual’s $50m purchase

Intech is to become a division of Skandia but the merged investment team will retain independence of manager selection and strategies, at least for the medium term, under a special charter, in the deal announced yesterday for Old Mutual to acquire all of Intech.

Skandia will eventually fold its investment funds into the Intech funds, but initially retain all its multi-manager offerings. Other synergies to be progressively introduced include operational, finance and marketing functions of the two companies. Ron Liling, Intech founder and largest shareholder, with 43 per cent, said: “All Intech staff will be retained… We have negotiated a charter for full decision making on the investments … the Intech brand will continue and we will be responsible for our clients and they for theirs.” Michael Monaghan, Intech managing director, will head up the Intech division, which will effectively become Skandia’s “engine room”, according to Ross Laidlaw, Skandia chief executive. Intech’s Hugh Dougherty remains chief investment officer, Liling as head of equity research and Daniel Needham as head of multi-strategy investments. The size of the investment team increases from Intech’s current 15 to 23. Intech’s total staff of 50 will be added to Skandia’s 140. The Intech partnerships with CRA Rogers Casey for international research and Quentin Ayers for private equity research will continue. The investment charter will be renegotiated after an earn-out period, with both staff and shareholders incentivised during that period. The deal is for Old Mutual, the London-based life office and funds manager which acquired Skandia this year, to buy 100 per cent of Intech Pty Ltd, the main holding company, and all its subsidiaries. Intech earned a pre-tax profit of $3.3 million last financial year. The sale price, subject to earn-out variations, is rumoured to be about $50 million. Intech has $8.5 billion under management, compared with Skandia’s $5 billion, and it is understood that its costs of investment administration are lower even in absolute terms. Intech also has about $12 billion under advice. Liling said that the main benefits from the sale for Intech’s existing clients were access to capital to help build new product capabilities, particularly for structured investments, and the retail capabilities of Skandia. “In an environment of choice, we will be able to give our clients a platform to go on (for non-super),” he said. For the two companies’ businesses it will increase efficiencies through the extra scale and widen the scope of the businesses. Liling said that the loss of State Super’s advisory business (for about $30 billion under advice) in April was not a catalyst for the sale process, which was commenced late last year. “We realised that it would be increasingly difficult for us to operate as an independent, without access to capital,” he said. “The price pressure on multi-managers is enormous.” Intech retains about $4 billion in separately managed multi-manager accounts from State Super, which is invested via NSW Treasury Corporation. This business is now advised by Frontier Investment Consulting. Intech Fiduciaries, which is the RE for the funds, will be retained, with a six-person board, which will include Liling, Michael Monaghan and one other Intech director. Ross Laidlaw will be responsible for the overall business. Intech has about 20 shareholders, including staff. After Liling, the largest are Phil Green, the managing director of Babcock and Brown, with 17 per cent, and Monaghan, with 10 per cent. John Schaffer, who joined Liling as a major shareholder and executive director shortly after the firm was founded in the late 1980s, sold all but a small holding in the company a few years ago.