Advised platforms’ assets fell collectively by £15.6bn in the first three months of this year. In the second quarter, Transact's net inflows fell by £300mn, while others suffered even more. Aegon's two platforms experienced net outflows of £89mn last quarter, after a brief return to positive net flows the quarter before.
Vulnerability
Gunby reckons those of Transact's peers that went down the private equity route could have made themselves vulnerable. As interest rates – and therefore rates on debt – rise, debt-fuelled acquisitions become more expensive.
"I think it will change now. M&A activity may slow," Gunby told me. "Somebody that's straddled with debt, and if they've not fixed their payment terms especially, they'll be worried about servicing that debt. There may be organisations which have made themselves vulnerable through a lot of debt, because that's expensive to service. The target companies [for M&A] may change."
Perhaps peculiarly for a platform managing £53.5bn in assets, neither Transact nor IntegraFin employ a chief financial officer.
Analysts have flagged this, saying it is “essential” to have a CFO during a time when markets are choppy and business structures are constantly being challenged.
However, advisers – the main clients after all – are fairly sanguine about this; if advisers are leaving Transact, it is because of platform costs charged to clients.
Transact is cheaper than 16 of its competitors, charging 0.31 per cent on up to £100,000 of assets according to Lang Cat data. But it is also more expensive than 11 other of its other rivals.
With deals as low as 5 basis points being signed, and as disruptors like Fundment, Seccl and Platform One grow, pricing will have to be revisited by many providers.
Buying into an industry that is potentially facing a squeeze on costs may not seem very attractive to private equity investors, especially when inflation is providing a reason for many other sectors to put their costs up.
While Transact's share price might present an obvious reason why it will succumb to the sirens of private equity, once you dig a little deeper, such a deal does not make much sense.
ruby.hinchliffe@ft.com
