Franklin Templeton Investments has bought Edinburgh Partners in a move that brings Dr Sandy Nairn, the boutique’s founder, back into the US group’s fold and trebles its range of investment trusts.
Nairn, 57, will take on a new role as chairman of Templeton Global Equity Group, where he worked as director of research through the 1990s under its founder and pioneering value investor Sir John Templeton, who had sold up to Franklin in 1992.
Although the acquisition of the Edinburgh-based firm adds just $10 billion of funds to the $101 billion held by Franklin’s global division and the total $753 billion managed by the group, it significantly increases its presence in investment trusts.
In the UK Franklin is best known for Templeton Emerging Markets (TEM), a £2.2 billion investment trust whose original manager, Dr Mark Mobius, is due to retire this month after a 40-year career.
The deal – whose terms were not disclosed and which is expected to complete in the second quarter of this year – adds the £145 million EP Global Opportunities (EPG) investment trust, which Nairn has run since starting Edinburgh Partners in 2003 – and the £404 million European (EUT) investment trust under Craig Armour.
Nairn said: ‘I am very excited to be coming back to Templeton, the company that gave me my great appreciation for global investing.’
His statement added: ‘I look forward to sharing my perspective and experience with the Franklin Templeton organisation.’
Nairn will remain an investment partner and chief executive of Edinburgh but will report to Stephen Dover, Franklin Templeton’s head of equities. ‘Dr Nairn and his experienced team will be an excellent addition to our global equity capabilities,’ said Dover.
‘As chairman of Templeton Global Equity Group, Dr Nairn will bring many new insights to share, having run his own firm for the last 15 years, while also drawing upon his in-depth knowledge of the Templeton investment philosophy and process from his many prior years with the group.’ Dover added.
Edinburgh employs 12 investment professionals and in addition to its base in Scotland’s capital has an office in London and two in the US. It also runs a range of open-ended funds covering Global Opportunities, European Opportunities, Pan-European Opportunities and Emerging Opportunities.
The group's value approach has at times struggled to keep up with the post-financial crisis bull market. Over the past ten years the Global Opportunities investment trust has delivered a 173% total return to shareholders, below the 227% of the AIC Global sector but just ahead of the 170% from the MSCI World ex UK index. The shares trade 4.7% below net asset value.
European, which Armour took on from Dale Robertson in August 2016, has generated a return of just 67% over the past decade, trailing rivals and the 85% gain in the MSCI Europe ex-UK index. It stands at a 10% discount to NAV.
Jenny Johnson, president and chief operating officer of Franklin Resources, Franklin Templeton Investments' New York-listed parent, said: ‘This is the latest example of the firm continuing to make strategic investments in relatively small, yet highly experienced asset management teams that complement Franklin Templeton’s global offerings.’
There is also an element of opportunism in the transaction. Accounts filed at Companies House showed Edinburgh Partners Limited made pre-tax profits of just under £16 million in the year to 28 February 2017, down from £17.4 million in the previous year.
Assets under management had fallen to £6.9 billion from £7.7 billion in the previous two years. This prompted the directors to acknowledge the challenge the company faced, although they noted it remained financially strong and expressed confidence in its outlook.