Midas pursues golden opportunities in merger

Simon Edwards, chief executive of Midas Capital Partners, talks to Will Jackson about the group’s plans.

Q. Midas Capital Partners and iimia MitonOptimal announced a proposed merger earlier this month. What is the rationale behind combining the firms?

A.

A merger works on several fronts. On the fund management side, we are putting together three compatible teams, which have operated in the same space – cautious managed and balanced managed – for over 10 years. We are pooling talent on the funds of funds side and on the direct side. It also reduces “key man” risk.

From a marketing point of view, Midas can add value in terms of its sales and distribution network, including life companies and wraps. They have good products, but we can crank up their sales a bit more. Cost-wise, iimia MitonOptimal is fairly top-heavy and we are quite thin.

Q. Has Midas looked at merging with another firm before?

A.

We have considered it for a year or two, but have resisted previous approaches. This is stage two for Midas. It is not a sell-out, it is a buy and build strategy, and we are moving forward as the stronger partner. The merger gives our shareholders a degree of liquidity and the chance to roll forward into a larger vehicle.

Q. After turning down other approaches, why is it the right time for this deal?

A.

We felt uncomfortable about the prospect of being taken over. When firms are swallowed up by a parent company they risk being left in the corner. We are still Midas and we are still based in Liverpool. This is a big step forward and a better option than listing ourselves.

Q. Why have you used the Midas Capital name for the new company?

A.

It was felt by all parties that the Midas brand is stronger and snappier, although Miton has a good following. We will be looking at the possibility of rebranding fund names over the next few weeks.

Q. How will the combined business be structured?

A.

The dominant division is fund management and that will generate the bulk of revenues. Next is the wealth management division, which is a profitable operation run by iimia. The third leg is Intelli, our corporate finance division, which is headed by Gordon Neilly.

Q. On the fund management side, how easy will it be to integrate the investment teams?

A.

It should be quite straightforward. There is enthusiasm on all sides to get together and there is mutual respect. Everybody is focused on the wider good. We expect to retain all of the managers, and there are no planned redundancies.

All of them will be able to take equity stakes in the business and staff will own 45% of the firm. I will be the largest shareholder, with 17%.

Q. Do you see staff ownership as an important part of the Midas ethos?

A.

Yes, and it is important to maintain this going forward. It aligns us with investors. Staff will reinvest the cash they are getting out of the business into the funds. I will personally have close to £20m in the funds.

Q. Will the merger have any immediate impact on existing Midas and iimia MitonOptimal investors?

A.

I do not expect any major changes and it should be a seamless transition. As I mentioned before, there may be a re-branding of the funds but we will see how the review goes.

Q. As managing director of Midas Capital’s fund management business, what will be your immediate priorities after the merger?

A.

My immediate priority will be to ensure that the fund management teams are both settled within the wider group. There is no reason why they shouldn’t be.

I will also ensure that there is a sharing of best ideas and that we have the right sales team in place. Where appropriate, we may list one or two of the Miton products on the distribution channels we have already.

Q. How will your new position affect your role as manager on the Midas Balanced Growth and Balanced Income funds?

A.

Other people will be able to help with the running of Midas Capital, and I look forward to spending more time on investment management. My personal investment in the funds gives me an added incentive.

Q. Will the business continue to focus on multi-asset products?

A.

Definitely. There will be continued demand and an increased focus from the intermediary side.

Q. Is the appetite for multi-asset funds dependent on continued stockmarket volatility?

A.

No, we are seeing a long-term shift towards multi-asset investing, and away from the traditionally managed and fettered funds run by the big investment houses.

It ticks a lot of boxes as far as individual clients and intermediaries are concerned. Multi-asset funds give intermediaries more peace of mind, with access to a wider asset base and best-of-breed managers.

Q. Miton Asset Management recently announced plans for new Capella and Vega multi-asset funds in 2008. Will these launches go ahead after the merger?

A.

We will look at the fund ranges in the review. I do not want to pre-judge the outcome.

Simon Edwards is the chief executive of Midas Capital Partners. Before establishing the firm in 2002, he worked for Credit Suisse First Boston and the Merseyside Pension Fund.