Boutique fund manager Liontrust has confirmed it is to acquire Neptune for £40 million.
The deal, which expected to complete in October subject to regulatory approval, will see Liontrust's assets under management increase by £2.8 billion to a total of £17 billion. The firm will issue up to £35 million in shares to fund the deal.
The entire Neptune investment team, including founder Robin Geffen, is to join the Liontrust office, based near London's Covent Garden. Under the deal, Geffen will step down as chief executive to focus on leading the team and managing his funds.
Ben Yearsley, director at Shore Financial Planning, said: "A price tag of £40 million for a business that made profit of £100,000 seems a high price - especially when you consider there is a further £16 million in costs associated with the deal.
"But, price aside, Liontrust and Neptune are a decent fit. Now we need to wait and see who will be joining Robin Geffen in the move; managers such as chief investment officer James Dowey and Mark Martin, who runs the UK Mid Cap and UK Opportunities funds, are crucial to the business."
Neptune, founded in 2002 by Robin Geffen, has 19 active funds. Of those Robin Geffen manages four-star rated Neptune Income, co-manages three-star rated Neptune Balanced Fund, five-star rated Neptune Global Technology, four-star and Neutral-rated Neptune Russia and Greater Russia, two-star rated Neptune Global Smaller Companies and co-manages three-star rated Neptune Global Alpha.
Robon Geffen said the decision to sell Neptune has been an easy one. "The deal will enable me to step away from managing the business and focus solely on managing funds and leading my investment team, which is my real passion."
The largest fund under management at the firm is Neptune Balanced, with £417 million under management, followed by Neptune Japan with £307 million of assets. Neptune Balanced has posted year-to-date gains of 13.5%, according to Morningstar data, with top holdings including tech titans Amazon (AMZN), Microsoft (MSFT) and Alphabet (GOOG). Shares in Google parent company Alphabet soared on Friday after releasing forecast-beating results.
John Ions, chief executive at Liontrust, said: "Neptune is a great acquisition for Liontrust and will enhance our already excellent investment proposition in areas where there is strong demand, such as global equities, equity income and emerging markets equities."
Morningstar rates Neptune’s “People” pillar, which is part of its qualitative ratings, as positive based on Robin Geffen’s experience. But head of fund research Jonathan Miller, looking at the Russia fund, notes concerns about Robin Geffen’s workload as well as the high turnover at the firm in recent years: “Three fund managers left in the past 12 months for roles elsewhere, indicating that retention is still an issue. While continuous turnover at the firm level is disappointing, we don’t believe it should affect this strategy in a significant way.” Fund returns in the 15 years to the end of May 2019 are ahead of its peers, Miller says, and that active strategies tend to outperform passive ones among Russian equity funds.
Geffen recently courted controversy by appointing his son, William, as an assistant fund manager at Neptune.
Miller adds that Neptune is a “investment boutique offering high-conviction equity portfolios”, where the managers operate with substantial freedom. He remains concerned that seven of the firm’s fund line-up has assets under £50 million. On staff turnover, Miller says: “We would like to see a period of stability to build our conviction in the firm as a sound steward of investor capital.”
