Regal on the hunt for more fund managers

Phil King, co-founder and chief investment officer of Regal Funds Management. Picture: Jane Dempster

Regal Funds Management is the hot topic for investment bankers as they search for a fresh takeover target for the listed fund manager.

DataRoom understands deal makers have been taking listed market opportunities to Regal, which has some interest.

Among the targets Regal has considered are Magellan, which has a $1.9bn market value, and Platinum Asset Management, worth $942m.

Yet DataRoom understands that unlisted opportunities are on Regal’s radar right now.

It recently sold down its interest in Platinum to below 5 per cent.

Regal is keen to buy other fund managers because it needs to increase its market value and free float to gain traction in the market and widen its shareholder base.

In addition, consolidation among Australian fund managers could strengthen their market position. The challenge is that they can be personality-based, and when star stock pickers head for the door so do investors.

Regal launched a bid for the $545m Pacific Current last month, but the target described its $586m proposal as opportunistic.

Regal likes Pacific Current’s alternative investment strategy – it does not just invest in equities but other products as well.

The following day, GQG, which has a market value of more than $4bn, indicated it was considering a bid for Pacific Current.

GQG would easily outmuscle Regal, which would no doubt prompt the group to consider options elsewhere.

Regal last year purchased hedge fund VGI Partners.

It also embarked on a joint $1.7bn bid with private equity firm EQT to buy Perpetual, but that was rejected.

One highlight for Regal is that Pacific Current owns 16 high-performing specialist boutiques in key strategic markets, including Australia, India, Luxembourg, the US and Britain, which means the parent company is playing a nurturing role.

The risk for some of them is that GQG may offload those that do not fit its agenda.

So GQC could be considered by Pacific Current’s interests as a predator rather than a friendly buyer.

While GQG has offered no details around its bid price, the expectation is that it would need to show some sort of commitment to moving forward on its indicated plan or else risk coming under fire from regulators.

Ironically, Regal is using Barrenjoey as its adviser, which is partly owned by Magellan, which is said to be one of Regal’s targets.

Magellan owns 36.7 per cent of Barrenjoey, which is estimated to have lost $26.7m in the 2023 financial year.

Competitors in the market are on watch for staff cuts among its junior ranks and the potential for a new equity backer to come to offer additional assistance.

There’s been no news on either so far.

UBS, which is advising Pacific Current, is the former employer of a large number of senior Barrenjoey operatives.

Pacific Current’s share price is now $10.38, rallying from the $7.80 it was trading at before Regal made its play. Regal is already on its register with a 12 per cent interest. Pacific Current has a 4 per cent interest in GQG.

As with its Perpetual offer, Regal has found itself a funding partner in River Capital for the cash and scrip bid.

Regal argues that Pacific Current would benefit from its extensive network of high net worth and family office relationships, as well as its institutional-grade operating platform.

Regal Funds Management was founded in 2004 by Andrew and Philip King. It has a number of alternative investment strategies and provides investment management and investment advisory services for a number of Australian unit trusts and Cayman Island companies.

Regal Partners has $5.8bn in funds under management.