Interactive Investor, the UK’s second-largest fund supermarket, is exploring an initial public offering in London this year on the back of a boom in the retail investing.
The group has been driving consolidation in the wealth management sector with a series of acquisitions, most recently this month buying a direct-to-consumer investment platform from rival Equiniti for £48.5m.
Interactive Investor now accounts for about a fifth of the retail investment platform market, but is the only big competitor not to be listed. Larger rival Hargreaves Lansdown is valued at about £7.4bn. AJ Bell, which floated in 2018, also has a substantial retail investment business.
Richard Wilson, chief executive of Interactive Investor, told the Financial Times that the company was now “looking at the various options”, adding that a “natural outcome for a firm like us — as a kind of a consumer-facing retail firm — would be [an] IPO”.
He added that this was not the only option and that it was “about timing, but that’s certainly something that we will be looking at”.
The company, which has grown from £3.5bn in assets under management in 2016 to £50bn this month, is majority owned by funds advised by JC Flowers, a private equity firm.
Wilson said the company was in its fourth year in the JC Flowers fund, which was usually when the firm would seek an exit from its investment. JC Flowers declined to comment.
Wilson said he also had “incoming” calls from Nasdaq-listed special acquisition companies with the offer of a US listing, but that as a UK-focused business it would “not make much sense”.
There has been a surge in trading activity among younger retail investors in the UK, a rapidly growing market with more than £200bn under management by retail brokerages. Like the US, trading volumes in the UK were boosted by the number of people stuck at home during the pandemic.
Pension reforms and reduced social spending have also meant that more people have cash to invest in the market. Hargreaves Lansdown became the latest investment platform to raise profit expectations last week, reporting “elevated” volumes of share dealing since the start of the year.
Interactive Investor has benefited from heightened interest in the wake of the GameStop day trading frenzy in the US. The number of people signing up for accounts jumped almost 370 per cent in the final two weeks of January, compared with the same period the year before, with demand from 18 to 25-year-olds rising more than 1,200 per cent.
The company’s chief said an initial public offering would include a substantial offer to retail investors. The firm has been lobbying the government in recent weeks over loosening rules to allow greater retail investor participation in IPOs.
Wilson, along with his counterparts at Hargreaves Lansdown and AJ Bell, sent a letter to John Glen, City minister, calling on the government to encourage companies to include retail offers in new flotations.
Wilson said: “If we list, we should set a good example about not just how we do it, but what we do and where we do it. Because our purpose is to support the UK retail investor and make them more confident in their long-term financial future.”
He added that the business had sought to make itself ready for a potential flotation by selling a bank that had been acquired as part of a wider deal for Alliance Trust Savings in 2019.
“An IPO or other event when you’re technically a bank [that is not substantial] is a bit tricky. So there’s been some factors we’ve worked on to make sure that we’re ready for the next phase of our development. And most of those have been achieved.”
He said market consolidation was over.
“There’s no one left. So we’re now working up the next plan. We’ve obviously gone through a process of very substantial growth over a short period through the various acquisitions, and, to be fair, also organically.” He added that the business was growing about 13 per cent a year in terms of assets without acquisitions.
“Our model has got traction — simple, open, transparent, unconflicted service where we charge you a straightforward no-nonsense fee.”