Activist fund targets St James’s Place
PrimeStone criticises UK’s largest wealth manager for failing to deliver value to shareholders
St James’s Place, the UK’s largest wealth manager, has been targeted by activist investment fund PrimeStone Capital for its high cost base and for failing to deliver value to shareholders.
On Monday, London-based PrimeStone, which was founded by three former executives at private equity firm Carlyle Group, unveiled a 1.2 per cent stake in the wealth manager, a holding worth almost £61m.
In a letter, which was sent to SJP’s board of directors and published on PrimeStone’s website, the activist group criticised SJP’s “bloated organisational structure,” “excessive executive pay” and struggling Asia operation for hurting shareholder returns.
SJP, known for its expensive management fees, has come under fire as higher-cost asset managers face intense pressure to deliver value while cheaper investment platforms such as Vanguard and AJ Bell scale rapidly in the UK.
PrimeStone partners Benoît Colas and Damian Hahnloser said in the letter: “It is time for the company to address its high cost base and change its culture . . . to deliver its full value-creation potential to long-neglected owners.”
SJP has more than doubled client assets under management in the past five years, from about £55bn in August 2015 to £115bn in August 2020, when the company reported its half-year results. The wealth manager is known for its actively managed funds, and the high premium it places on — and charges for — advice.
SJP’s profitability has declined by 20 per cent over the same five-year period as competitors Hargreaves Lansdown and AJ Bell have grown by more than 25 per cent, despite comparable net inflows of 2 per cent to 3 per cent per quarter, according to PrimeStone’s analysis.
Shareholder returns in SJP were just 2 per cent a year since 2015, PrimeStone said, below that of the FTSE 100.
PrimeStone also criticised SJP’s structure, noting that more than 120 employees have job titles that included “head of”.
“We struggle to understand how SJP can have that many departments to be headed,” said the activist investor.
One-quarter of SJP employees earn more than £89,000 a year — “a staggering statistic”, the letter said, and higher than the sector average of £67,000. SJP employs more than 1,300 people, according to company reports from 2019.
There are more than 80 people in the marketing team alone, despite SJP’s assertion that 90 per cent of new business comes from existing clients or client referrals, according to the activist.
PrimeStone said SJP’s Asia operation was lossmaking — pointing to £22m in annual losses and, the investment fund said, no path to profitability. “Only a lack of attention to shareholder value can explain the continued support given by SJP to this structurally unprofitable activity over so many years.”
SJP acknowledged the letter and said “it looks forward to commencing a dialogue” with PrimeStone. The wealth manager will report its third-quarter results on Tuesday.