Snowball taking control of fund manager fees

Listed financial services company Snowball will acquire portfolio construction and fund-of-funds manager Officium Capital for $6.5 million, the company has announced.

Officium Capital acts as the responsible entity of 14 funds, with approximately $440 million in funds under management as at October 31, 2009.

There is a maximum potential claw-back payment of $2.5 million payable to Snowball if agreed funds under management levels supporting the $6.5 million valuation are not met in the 12 to 18 months from October 1, 2009.

Snowball is acquiring Officium Capital from Officium Group, which along with its subsidiaries owns approximately 62 per cent of Snowball.

Officium Group has indicated that it intends to distribute the 62 per cent of Snowball it owns to its shareholders as an in-specie distribution, which would then be spread into smaller, directly held parcels among shareholders, according to Snowball.

Benefits of the transaction to Snowball include further diversification of revenue streams in the form of fund management fees, while acquiring the responsible entity capability within Officium Capital will provide Snowball with better control over the pricing of portfolio management and the prices charged by the underlying fund managers that make up a client’s total investment portfolio, the company said.

Growing levels of funds under management would also lead to greater bargaining power over the supply of underlying fund management services to the portfolios, resulting in scale benefits and lower aggregate management fees for clients, the company said.

The group also expects cost benefits for its other advice business, Outlook Financial Solutions, and potentially through distribution to external or acquired advice businesses.

Snowball has announced a general meeting on February 12, 2010, for shareholders to consider the acquisition of Officium Capital and a new Employee Incentive Plan and related resolutions.