No nonsense

LONDON'S ISIS EQUITY PARTNERS, LED BY WOL KOLADE, IS NO LONGER A CAPTIVE OPERATION , A MOVE PROMPTED LESS BY A HUNGER FOR INDEPENDENCE THAN A PRAGMATIC VIEW ON INSURANCE ACCOUNTING RULES

Wol Kolade now finds himself in control of an independent limited liability partnership. It will be responsible for the private equity funds and venture capital trusts (VCTs) previously controlled by ISIS Equity Partners (ISIS), the private equity arm of UK fund manager F&C Asset Management that is owned by Friends Provident, the listed UK insurer. In total, the new entity will oversee assets worth approximately £500 million ($906 million; €740 million).

?In the long-term we had ambitions to raise more third party funds, but there was no timescale planned for it,? Kolade says.?[The spinout] came up as a result of Friends Provident having to resolve issues arising from accounting standards changing.?

Kolade is referring to the framework of accounting rules known as International Financial Reporting Standards (IFRS), which states that a company must account on its balance sheet for the finances of any subsidiary of which it owns more than 51 percent. IFRS was issued by the Board of the International Accounting Standards Committee in April 2001, after which the European Union, motivated by the success Enron had had in disguising the terminal problems in its subsidiaries by excluding them from its accounts, decreed that companies operating in Europe had to conform to it by the end of 2005.

This presented a problem for ISIS, which following the merger of ISIS Asset Management Plc and F&C (Group Holdings) Ltd last October, became a subsidiary of F&C AssetManagement ? a business that in turn is a subsidiary of Friends Provident. Under IFRS, Friends Provident would have been required to include information about ISIS' portfolio companies in its accounts ? which according to Kolade, would have been ?a bit of a nonsense.?

?It makes no sense for these companies to be included on Friends Provident's balance sheet,?he says.?They'd just cloud its accounts.?

To avoid the clouds, ISIS is spinning out under the name ISIS Equity Partners LLP. F&C, which currently owns 100 percent of the group, will transfer 80 percent of ISIS' equity to Kolade and his team in order to exempt itself from including the firm and its portfolio investments on its balance sheet.

According to Kolade, little else is changing at ISIS. The equity transfer to the ISIS team will take place at no consideration and ISIS and F&C will maintain the same 80/20 split of ISIS' profits that is in place already. ISIS will also continue to use F&C as a provider of marketing, distribution, legal, accounting, secretarial and other support services.