Invesco will find it hard to stay independent

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The Independent Online
It is becoming almost a mantra, the way top fund managers proclaim their faith in independence as soon as they are released from the protective embrace of a major shareholder.

Charles Brady, chairman of Invesco, did it yesterday, after the announcement that Peregrine is to sell nearly all of its 24 per cent stake into the US market. Before him, Hugh Stevenson of Mercury Asset Management said much the same thing after the little-lamented departure of its dominant shareholder, SG Warburg as it then was.

However touching such expressions may be, independence may be difficult to maintain in an environment that sets a small group of attractive and available fund management businesses alongside a large, salivating pack of potential suitors.

Just last week NatWest Group reiterated its strong interest in bolstering its investment management activities. Across the Atlantic there are numerous businesses, GE Capital being just one of the best known, keen to strengthen their hand in European fund management.

Fund management does not come cheap these days. The goodwill alone is an awesome financial obstacle to any takeover. None the less, fund management's capacity to provide a steady stream of earnings has begun to exert an irresistible attraction on top bankers and insurers seeking relief from the roller-coaster nature of their businesses.

It is surely only a matter of time before the market witnesses the takeover of one of the major UK fund managers. Mercury must top the list, as it is both the premium business in this country and now fully available on the open market. Gartmore still has Indosuez holding a dominant stake; but, given the tribulations of the French bank, this cannot be held to be an insurmountable barrier to someone willing to pay a full price.

Now Invesco looks set to join this select group of the eligible. Its attaction is rather different, in that its strength is overwhelmingly in the American market. Peregrine, Lee Ka Shing's securities group, is a canny operator with a knack for selling at the top. Even so, Ivesco remains an attractive proposition, as yesterday's 38 per cent jump in pre-tax profits shows. It would be surprising if it were still independent a year from now.