AllianzGI's Macdonald: MiFID II could accelerate asset management M&A


Lucy Macdonald, manager of the Brunner investment trust

The asset management industry can expect to see more consolidation following the introduction of MiFID II, according to Brunner investment trust manager Lucy Macdonald.

Allianz Global Investors, which runs the £312m Brunner trust, has said it will absorb research costs when legislation comes into force in January 2018.

This is also the case for firms such as Goldman Sachs, Legal & General Investment Management and JO Hambro Capital Management.

But Macdonald (pictured) said this would not be a viable option for all firms in the asset management industry.

“The requirement for asset management companies to pay for external research is likely to result in further consolidation as managers face pressure on profits. This adds to a number of additional challenges facing the industry, including the rise of passive and lower fees.

“Having an in-house research platform and the financial capacity to support it will become even more valuable in this environment. Therefore large, well-diversified, financially robust managers will be better positioned than the small managers dependent on external research and with less access to company management.”

The past 12 months has already seen the merger of Janus with Henderson Global Investors and Standard Life Investments with Aberdeen Asset Management.

The changes, said Macdonald, were a good example of when regulation could have an unintended impact.

Meanwhile, Macdonald, who took over management of the trust in June 2016, said she was focusing the portfolio on the theme of digitalisation.

Technology makes up 10% of her portfolio with companies such as Microsoft and Visa sitting among her top ten positions.

She is particularly seeking companies she labels “undiscovered digital winners” such as professional services company Accenture. The share price of the firm, which provides technology consulting and solutions among its services, has risen 14% over one year to trade at 135p.

“Accenture is taking advantage of the digitalisation trend by enabling other companies to shift online so it is in a very strong position going forward.”

Train: There is nowhere to hide from technology

However, she pointed out not all ‘new’ style digital companies had the potential to be big winners over old ones. Twitter, which floated in November 2013, has seen its share price fall from 41p to 17p after revenues declined¬†

“Twitter has struggled to find engagement with its users and advertisers are leaving, it is not a profitable company and it has been difficult for them.”

In the second quarter of 2017, no new users joined the social media platform, while advertising revenue declined by 8% to $489m from $535m a year ago.

The Brunner investment trust has returned 29.3% over one year to 4 October, according to FE, versus returns of 23.6% by the AIC Global sector.

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