GAM fund managers have raised their stake in Liontrust Asset Management to 5.1%, just weeks after publicly urging the company to consider a strategic overhaul, including a possible sale or merger.
Stake increase and context
The move, disclosed in a regulatory filing on Tuesday, sees GAM's holding rise from 4.5% to 5.1%, making it one of Liontrust's largest shareholders. The increase comes after GAM sent a letter to Liontrust's board in late October, calling for a review of strategic options to address the company's underperformance.
Liontrust, a UK-based asset manager with £28 billion in assets under management, has seen its shares fall by nearly 40% over the past year, according to data from Refinitiv. The company's stock has been under pressure due to outflows from its flagship funds and a challenging market environment.
Demands for change
In the letter, GAM argued that Liontrust's current strategy has failed to deliver value for shareholders and urged the board to explore a sale, merger, or other structural changes. "We believe that Liontrust's board should immediately initiate a process to explore all strategic alternatives, including a sale of the company," the letter stated, according to a source familiar with the matter.
GAM's increased stake signals a growing dissatisfaction among investors and puts pressure on Liontrust's management to respond. The fund manager has previously expressed concerns about Liontrust's cost base, fund performance, and corporate governance.
Liontrust's response
Liontrust acknowledged receipt of GAM's letter in a statement last month, saying it would "engage constructively" with shareholders. However, the company has not publicly committed to a strategic review. A spokesperson for Liontrust declined to comment on the latest stake increase.
The asset manager has been grappling with net outflows of £1.2 billion in the first half of its financial year, as reported in its interim results in November. Performance fees have also declined, contributing to a 15% drop in pre-tax profit to £18.5 million.
Industry implications
GAM's activist stance is unusual in the UK asset management industry, where shareholder engagement is often more subdued. The move highlights the growing pressure on mid-sized fund managers to scale up or restructure in a rapidly consolidating market. Analysts at Numis Securities noted that Liontrust could be an attractive acquisition target for larger rivals seeking to expand their UK presence.
The increased stake also raises the possibility of a proxy fight or board changes at Liontrust. GAM has not ruled out further actions, including nominating directors to the board, according to a person familiar with its strategy.
Market reaction
Liontrust's shares rose 2.3% on Tuesday following the news of GAM's increased stake, outperforming a flat FTSE 250 index. The stock remains down 35% year-to-date, however, reflecting ongoing challenges.
GAM's total investment in Liontrust is now estimated at around £15 million, based on the current share price. The fund manager has indicated it may increase its stake further if Liontrust's board does not act on its demands.
