2017 was a good year for operations, acquisitions, mergers and expansion into new markets by leading international asset management companies; yet another example of the asset management industry trend towards higher concentration, while seeking higher efficiency and margin growth. Technology, regulatory changes, opening into new markets and strengthening their product supply capacity put these operations into context.
One of the major ones was the Aberdeen Asset Management and Standard Life merger, which together have become one of the largest investment companies in the world with 737 billion Euros in assets under management. The merger was closed in August, after the operation was announced in early March.
According to the firm, the merger leverages the complementary capabilities of both companies, leaders in the investment and savings market. The result is an investment group with strong brands, at the forefront of institutional and wholesale distribution franchises, market leading platforms and access to lasting strategic alliances globally.
Also, by combining the strong balance sheets of both companies, the resulting group has greater capacity for investing, as well as to grow and innovate. Together, Standard Life Aberdeen has offices in 50 cities around the world, serving clients in 80 countries. In addition, the firm maintains a market capitalization of more than 12.1 billion Euros (11 billion pounds).
The other two major operations in 2017 were the merger between Henderson and Janus Capital, and Amundi’s acquisition of Pioneer Investments. Regarding the first of those operations, it was carried out through a share exchange: each Janus share was exchanged for 4.719 new Henderson shares. With this exchange, Henderson shareholders took control of 57% of the capital and Janus shareholders of the remaining 43%. The resulting company, Janus Henderson Global Investors, has 320 billion dollars in assets under management and a market capitalization of around 6 billion.
The combination of both businesses has created an important global leader in asset management with a significant scale, as well as a great diversity of products and investment strategies, and great depth in global distribution of funds. In fact, Janus’ strength in the US market will combine with Henderson's in the United Kingdom and Europe, creating a very global management company, with a very diverse and widespread geographic footprint.
The acquisition of Pioneer Investments, which was closed towards the end of 2016 for an amount of 3.545 billion Euros, is the third major operation that the sector saw last year. During the first six months, Amundi established the new group’s growth strategy, defined the priorities of its business lines, and established an integration plan; so that by July it was able to completely close the purchase.
Although with a little less dimension than the previous operations, another important transaction within the industry has been Schroder’s acquisition of Adveq, an asset manager specialized in private capital worldwide. As a result, of Adveq’s acquisition - which was renamed Schroder Adveq - Schroders' private assets business rose to more than $ 7 billion in client commitments.
Other operations carried out by asset management companies with the aim of growing in markets where they already had a presence have perhaps been less striking. The clearest example was BlackRock’s purchase of Citi’s asset management business in Mexico in November 2017. With this operation, BlackRock in Mexico doubled its size.
In fact, BlackRock and Citibanamex, a member of Citigroup, signed an agreement for BlackRock to acquire Citibanamex's asset management business. Impulsora de Fondos Banamex, has approximately 31 billion dollars in assets under management through fixed-income products, equities, and multiple asset products, mainly for consumer banking clients.
UBS also looked at growth possibilities in Latin America and bought CONSENSO, Brazil’s largest family office, in May. Both companies closed an agreement under which UBS acquired a majority stake in the Brazilian multi-family office that will result in the combination of its wealth management operations in Brazil. The resulting division is being directed by both, UBS executives and CONSENSUS’ founding partners.
With this operation, UBS consolidated its capabilities in Brazil, improving its offer for local clients and offering advice from a global player in the sector. The entity recognized after closing the agreement that this transaction allows them to accelerate their expansion in Brazil and to reaffirm their commitment to grow the wealth management business.
And for 2018?
These are just some of the most significant operations of 2017, which was a year when the industry showed some concentration and the search for synergies. The trend has continued during the first weeks of 2018, during which we have already witnessed First Eagle Investment Management’s acquisition of NewStar Financial, and the announcement of a merger agreement between Quaero Capital and Tiburon Partners. The big question now is what else will this year bring.
According to experts, it would not be unusual for this trend to continue as asset management firms face a change in their own industry marked by technological challenges, such as blockchain technology or bitcoin development, by new millennial consumers, by passive management’s strength, and by the pressure that all this is asserting on its margins.