Jul 2010 Financial News

Guardian Asset to merge with Guardian Life

Jul 28, 2010

Guardian Asset Management's (GAM) Jamaican operation will be downscaled to a department and merged with the operations of Guardian Life Limited, once it finalises the deal to sell a portion of the investment house's portfolio to new kid on the block, Proven Investment Limited.

But Jeffrey Mack, the man who runs the parent operation, Guardian Holdings Limited (GHL), says the changes will not disturb Guardian Asset's Trinidad operations, where it will continue as a stand-alone company.

"Guardian Asset Management grew out of the investment department of Guardian Life, so we are actually going back to that old model where we have an investment department," said Mack, GHL group chief executive officer.

The deal with Proven, which is still being finalised, Mack said, will see GAM disposing of 25 per cent of its business, comprising non-proprietary or third-party funds under management.

The other 75 per cent, which the Guardian Holdings boss said were funds managed on behalf of two other Jamaican subsidiaries - Guardian Life and West Indies Alliance - will still be managed by the retrenched asset management division.

He declined comment on personnel changes, leaving questions unanswered about Lisa Gomes - who runs the business - and whether she will return to Trinidad or remain in Kingston in another capacity.

The value of the Jamaican company's portfolio was not disclosed, neither was Mack willing to speak to the price on the table for the 25 per cent sell-off.

Right opportunity

He told Wednesday Business that the deal with Proven - a nascent Jamaican operation in the business of asset acquisitions - was an opportunistic one for his company.

The sale is expected to be wrapped up by next month.

"One of our three core businesses is asset management and our asset management business in Trinidad and Tobago and here in Jamaica are two different business models," Mack said.

"The asset management business in Trinidad and Tobago is the classic asset management business where we advise high net-worth individuals, we sell products to retail customers like mutual fund to help them accumulate and manage their wealth."

That business, the Guardian CEO said, also manages the proprietary assets of the group.

"It's a trading business, where they trade in repurchase agreements; and the repurchase agreements centre on Government of Jamaica bonds," Mack said of the Jamaica operation.

Likening the situation to lending out the company's balance sheet for a trade margin, Mack noted that the insurance-sector regulator, the Financial Services Commission, has been discouraging reliance on this type of business activity.

And it is not that Guardian wanted to ditch the asset management business here entirely, as its initial application for a mutual-fund licence indicates.

"The issue as you move into that market (is that) you have some very strong and entrenched players," said Mack.

So the company was keen to discuss what it said was an unsolicited buyout offer from Proven.

"We were able to negotiate what we thought was a fair price for the business and so we decided to sell."

Guardian Asset Management is a wholly owned subsidiary of Guardian Holdings.

At the end of 2009, the Jamaican arm of Guardian Asset recorded net profit of J$463 million, more than double the J$187 million it earned in the previous year.

On-balance-sheet assets grew to J$23 billion, an increase of approximately J$2 billion over 2008.

More than J$20 billion of the company's on-balance-sheet assets are in repos.

Anticipating future challenges with bond yields forced down by the Government's debt exchange scheme, Guardian had said it would have been seeking ways to deliver on its strategic plans to ensure customer satisfaction, growth, profitability and reasonable returns for its stockholders.

Some 85 per cent of Guardian Asset's investment portfolio is made up of fixed-income securities, mostly government bonds, Mack said.

First for proven

The deal with Proven is awaiting due diligence by the buyer as well as regulatory approval.

"The GAM purchase makes sense because it's an industry that we know; it's our bread and butter," Proven's CEO, Chris Williams, told Wednesday Business.

He also declined comment on the value of the deal, Proven's first acquisition since its February start-up.

"It's an early first step," Williams said this week. "We are being very cautious and will be even 100 more times cautious with any other."

It is not yet clear what impact the sale will have on GAM's staff of about 60, although Proven is said to be identifying staff it will take on.

"What we will do is we will rebuild our internal investment department by taking a number of employees that are working at GAM and bring them into Guardian Life," according to Mack.

Meanwhile, Williams said Proven was about 60 per cent through with its due-diligence assessment.

"Its a clean, well-run entity but that's not surprising given the reputation of Guardian."

Proven, a five-month-old investment firm, is a partnership involving Williams, pioneering investment banker Peter Bunting, Mark Golding and Garfield Sinclair. The latter three previously owned the investment firm, Dehring Bunting and Golding which was sold to Scotiabank.

Its business strategy is to be a niche player in the securities market with investment in tradeable assets and private investment across the region, using both debt and equity.


Source:
Sabrina Gordon, Business Reporter
sabrina.gordon@gleanerjm.com
Jamaica Gleaner
Wednesday July 28, 2010

http://jamaica-gleaner.com/gleaner/20100728/business/business4.html