Gartmore sells tracker business to State Side

Click to follow
The Independent Online

Gartmore has sold its tracker fund business to the US fund managers State Street in order to focus on its higher-margin active fund management division.

Following the sale, Gartmore, one of the UK's top pension fund managers, said it would also look at expanding through acquisitions. Glynn Jones, the chief executive, said that likely targets would be in the UK and the US but would have to fit in with asset management plans of its US parent Nationwide Mutual.

Passive fund managers aim to track stock markets by creating funds that mirror the composition of various indices, while active managers try to select a portfolio that will beat the market.

The group's decision to sell its passive operation comes at a time of increasing consolidation in the fund management industry. Passive fund management, in particular, is seen as a volume business where margins are low and economies of scale are key, while active mandates, particularly hedge funds, command much higher fee levels than passive briefs.

Gartmore has a range of long-short equity hedge funds and a fixed income hedge fund.

Although active fund houses such as Merrill Lynch and Phillips & Drew offer clients passive capabilities, the UK market is dominated by big players such as Barclays Global Investors and the insurer Legal & General.

These firms can also subsidise their passive fund management through securities lending services or custody of assets. With funds under management of around £18.1bn Gartmore's passive operation was too small to compete with specialist passive managers.

Gartmore's passive management business has 20 staff and around 150 institutional clients. The staff and clients will be transferred to State Street. The financial details of the sale were not disclosed.

Comments