By Kira Nickerson Foreign & Colonial Investment Trust is expected get a small uplift to its NAV due...
By Kira Nickerson
Foreign & Colonial Investment Trust is expected get a small uplift to its NAV due to HypoVereinsbank putting the investment group on the market.
In an announcement last week, the German bank said it will remain Foreign & Colonial's largest client but it no longer wants to be the majority shareholder in the group.
HypoVereinsbank has appointed Donaldson, Luftin & Jenrette International to review a range of strategic alternatives in relation to its shareholding in the group.
F&C Investment Trust has a 10% stake in Foreign & Colonial and as a result, analysts expect the trust to benefit from its sale.
Philip Middleton, an investment trust analyst with Merrill Lynch, said: "Other than a small uplift in the NAV, the long-term benefits will really depend on who the company goes to.
"If it is bought by a company which has a strong retail presence then it could enhance the investment trusts, through marketing strategies. What we do not want to see is a prolonged period of uncertainty."
Middleton said it was unlikely Foreign & Colonial would remain on the market for very long due to the current bullish environment for investment companies.
John Szymanowski, analyst with UBS Warburg, said the interesting aspect of the possible sale is whether the company, under new ownership, will be able to maintain the management contracts with the boards of its investment trusts.
He said: "When Gartmore was sold a number of management contracts were up for re-negotiation and they ended up losing a few. If F&C changes hands the boards may call for a beauty parade as the boards have to be sure that the investment manager is a stable outfit and need to be re-assured that whoever buys it has a suitable commitments.
"While I am quite sure that any buyer of Foreign & Colonial would not want to see the management contracts disappear, it is a possibility.
"We are seeing it happen more and more in the investment trust world, where boards are exercising their muscle power in this area." HypoVereinsbank has said it has the support of the board of the F&C Investment Trust and it believes that the review should lead to additional opportunities to develop the business further.
Robert Jenkins, chief executive of F&C, said: "Our expertise within the rapidly growing German retail fund management industry places us in a position to develop this business further, both through our continuing partnership with HypoVereinsbank and with other financial institutions."
Under the agreement, Foreign & Colonial, which has 11 years experience in developing and managing products in the German market, will be free to market to all distributors in Germany
Foreign & Colonial currently provides investment management advisory services to approximately £8bn of HypoVereinsbank retail funds, representing some 31% of the group's total £26bn in funds under management.
It is understood that F&C will continue to be the main provider of these services to the bank as well as expanding its product range for distribution through HypoVereinsbank's German retail banking network.
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