Find the hottest small asset management transactions since 2007

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Fund Management Update

Small transactions between asset management companies are proceeding at the hottest pace in the past 15 years, as companies seek tactical acquisitions rather than larger and riskier acquisitions-many of which are in one of the most fragmented industries in the world All failed.

Refinitiv data shows that in the first nine months of this year, there were more transactions between asset management companies worth less than $1 billion than at any time since 2007. These transactions aimed at improving business performance rather than reshaping the company also increased by 5% compared to the same period last year.

Morgan Stanley analyst Michael Cyprys said: “We expect the trend of tactical, smaller mergers and acquisitions to continue as asset management companies seek ways to improve their growth prospects.”

Cyprys added that asset management companies will look for new ways to buy new products and reach customers, rather than trying to absorb a major competitor.

Janis Vitols, head of investment banking at Bank of America Asset Management, said: “Although scale is still an important factor in the success of this field, in the final analysis, there must be the right solution.”

He added that several large asset management companies are reluctant to buy the skills and departments they already have, risking cultural conflicts and creating problems that consume a lot of management time.

Intense competition for new investors and steady decline in fees have long driven trading activities across the industry. The asset management industry is dominated by selected giant groups, led by BlackRock, Pioneer and Fidelity. At the other end of the scale are smaller boutiques that prosper by targeting specific areas.

Sitting in the middle is a group of asset management companies who must decide whether to seek scale through a major transformative transaction or to adopt a more tactical approach to expand into new areas.

Asset management companies are increasingly looking for technology and new growth areas to offset the impact of falling expenses and cater to the prosperity of retail investors. Popular areas include the private market for debt and real estate, as well as products that reference environmental, social and corporate governance or ESG indicators. Another key trend is the growing demand from investors for greater customization of investment portfolios and the use of models to help them choose a combination of stocks and bonds.

Jeff Stakel, head of Casey Quirk, a global asset management strategy consultant under Deloitte, said: “M&A activity has picked up. Some deals this year focus on expanding the operational capabilities of asset management companies.”

Stakel said the current push for mergers and acquisitions includes expanding the geographic coverage of asset management companies and additional transitions through financial technology groups and boutiques to enhance and improve existing business models.

In recent months’ fintech-oriented transactions, JPMorgan Chase buy OpenInvest and Campbell Global, a forest management and woodland investment company that helped financial advisors build ESG portfolios.June JPM also Bought nutmeg, A British digital consultant, valued the platform at 700 million pounds.pioneer Bought Just Invest In August, another small wealth management company focused on direct indexation provided a customized investment portfolio, which is expected to grow rapidly in the next few years.

However, some larger deals have also emerged.Earlier this year Wells Fargo Bank Sale Its asset management department conducted a $2.1 billion transaction with private equity firms GTCR and Reverence Capital. Bank of Montreal sold its overseas asset management business to Ameriprise in April.

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