Aviva sacks top fund managers to cut costs: Fears for future of stock picking arm - days after activist investor emerges as major shareholder

Aviva is set to fire its top fund managers to slash costs just days after an activist investor emerged as a major shareholder in the insurance giant. 

The FTSE 100 company is planning to oust ten equity managers from its investment arm Aviva Investors, The Mail on Sunday can reveal. 

David Cumming, chief investment officer for equities, has left. And Mikhail Zverev, head of global equities, is among the high-profile fund managers expected to be fired.  The cull comes after Cevian Capital – Europe's largest activist investor – was revealed to have built a 5 per cent stake in the insurance firm since buying shares last year. Cevian began investing in Aviva just weeks after Amanda Blanc was appointed as chief executive. 

Cevian said last week it wanted Aviva and Blanc to make bigger cost cuts and to hand back £5billion to shareholders.  The activist, which also took a stake in education firm Pearson last year, is pushing Aviva to slash £500million of costs by 2023. It is understood Cevian is supportive of Blanc and Aviva's management team. 

Blanc has been withdrawing Aviva from overseas markets in Europe and Asia since last summer to focus the business on the UK, Ireland and Canada.  A source close to Aviva last night said the insurer had been working on cost-cutting plans at its asset management division for the past 18 months – beginning before Cevian started building its stake. 

However, the timing of the high-profile job cuts will raise questions about Cevian's growing influence behind the scenes.  One analyst said the move dramatically scales back Aviva's stock-picking team just as the fund management industry comes under pressure from cheap 'robot' funds that follow the stock market.  He said the cuts will leave doubts over whether Aviva Investors will remain a strong player in the global asset management market or become merely an offshoot of the insurance business that manages some of its cash. 

Aviva Investors said it is in the process of consulting with the affected fund managers. The company said the aim was to 'focus' the business on popular funds including UK and US equities and 'sustainable' investments based on climate change. It is understood that about ten funds will be closed.  Aviva has a market value of £16billion. Shares closed on Friday at £4.17, up 28 per cent this year. 

Blanc announced in February the sale of its French business – which represented about 40 per cent of Aviva Investors' profits – to insurance broker Aema Groupe for $3.9billion (£2.7billion).  The group sold off its Polish business in March for €2.5billion (£2.1billion), which also accounted for a chunk of Aviva Investors' profits. 

Ben Cohen, an analyst at Investec, said he expects Aviva Investors to post an operating profit this year of £50million compared with the group's overall £2.1billion profit. Cohen said: 'Life companies are starting to focus more on real assets, like infrastructure and real estate, to generate a longer-term income for pensioners.' 

The firings will leave Aviva Investors with 25 fund managers. The asset manager had poached a number of its top equity investors from rival Standard Life Aberdeen over the past decade. But it has been hit by a string of high-profile departures in recent months. Euan Munro left as chief executive of Aviva Investors in January and was replaced by Mark Versey. The presence of activist investor Cevian will ratchet up the pressure on Blanc to slash costs. 

British companies have seen a sharp rise in activist investors over the past few months. It emerged that hedge fund Elliott took a multi-billion-pound stake in pharmaceutical giant GSK, although it has remained secretive about its plans. GSK is expected to update investors on its strategy on its capital markets day on June 23. 

Malcolm McKenzie, a director of consulting firm Alvarez & Marsal, said: 'There is no doubt that the pandemic has laid bare some of the underlying weaknesses and opportunities in UK companies, even in sectors seen to prosper during the pandemic.  'This is particularly true of high-growth companies in sectors like healthcare and tech. Although revenues grew, many of these businesses have seen bottom-line profitability fall below expectations and are increasingly in the activists' sights.' 

Source: This is Money