May 28, 2010, 11:12 AM EDT
By Renee Bonorchis
May 28 (Bloomberg) -- Investec Asset Management, which manages $70 billion, said clients want the money manager to operate independently from the banking units of Investec and that it can’t rule out an initial public offering in future.
“An IPO is not on the cards for the foreseeable future,” Hendrik du Toit, chief executive officer of the fund-management unit, said in an interview in London. “For the long term it will be unwise to rule out any strategic options. The uncertainty of the environment calls for open-mindedness on all our strategic options. Investec Asset Management is very comfortable with its current structure.”
Investec Asset Management, established in Cape Town in 1991, earned one-sixth of Investec’s operating profit in the year through March. It will consider a range of options, which may include bringing in strategic investors, as the money manager seeks to boost independence while improving shareholder value or adapting to any regulatory changes, du Toit said.
“We obviously need independence, but the format is not yet clear and we have very good owners,” he said. The full value of the assets held by the division isn’t reflected in the parent’s share price, he said.
Investec Plc, which entered the FTSE 100 Index this year, has a market value of 3.7 billion pounds ($5.4 billion). The company, which also owns private and investment banking and stock broking businesses in South Africa, London and Australia, fell 0.9 percent to 57 rand in Johannesburg trading.
Stronger
The parent company “is stronger for having Investec Asset Management in it,” said Neville Chester, a banking analyst and portfolio manager who helps oversee the equivalent of about $22 billion at Cape Town-based Coronation Fund Managers Ltd.
“Clients are placing an enormous premium on overt independence,” said Philip Saunders, head of the Investec Global Asset Allocation team. There are continuing discussions with Investec Plc on the issue, he said.
“A separate listing, leaving Investec with over 50 percent of the business would allow Investec to control it, but would also allow the asset-management people to have a greater degree of control over their own destinies,” Chris Gilmour, a Johannesburg-based analyst at Absa Investments, said in an e- mail. “It would also free up capital in the bank itself, which may be something Investec is considering” before regulators tighten banking rules, he said.
The fund manager is also “not big on” mergers and acquisitions “but may need to be in time,” Du Toit said.
--Editor: Vernon Wessels, James Amott.
To contact the reporter on this story: Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net
To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net Edward Evans at eevans3@bloomberg.net
FROM BusinessWeek
