An Old Mutual Asset Management IPO appears to be a question of when, not if.
OMAM is the U.S. money management unit of Old Mutual PLC, the venerable London-based international financial services group. Old Mutual has been contemplating an IPO for years, and a move seems imminent. OMAM is poised for growth after a restructuring that began when Peter Bain was brought in as president and chief executive officer in February 2011.
Mr. Bain could not comment on the IPO speculation, except to say that as a member of the Old Mutual executive committee, it has been discussed at the group level.
“Honestly, what matters is how well the business is performing,” Mr. Bain said, speaking by phone from his office in Boston.
Results for 2012 show net client cash flow from continuing operations at £900 million ($1.4 billion) up from losses of £2.9 billion in 2011. The figure marks the first positive flows from continuing operations for OMAM since 2008. Adjusted operating profit increased 10% on a continuing basis, driven by strong markets and positive flows. AOP operating margin on a continuing basis was at 29% before non-controlling interests, up 2% on the prior year.
OMAM is a multiboutique asset manager with nine affiliates offering a diverse range of investment strategies. It had net inflows of $4.1 billion in the first quarter of 2013. The $223 billion in current funds under management represents a 7% increase from year-end 2012. Gross inflows from continuing operations were $10.4 billion vs. $9.4 billion reported in the same quarter of last year, of which $3.9 billion came from new client accounts. OMAM said.
“It was particularly pleasing to see inflows across a broad spectrum of investment strategies,” Julian Roberts, Old Mutual group CEO, said in a May 9 conference call with analysts.
OMAM's nine affiliates are: Acadian Asset Management LLC; Barrow, Hanley, Mewhinney & Strauss LLC; The Campbell Group LLC; Copper Rock Capital Partners LLC; Echo Point Investment Management LLC; Heitman LLC; Investment Counselors of Maryland, LLC; Rogge Global Partners PLC; and Thompson, Siegel & Walmsley LLC.
No IPO is now scheduled, but the scuttlebutt is that OMAM plans to do something this year, said Kathy Smith, principal at Greenwich, Conn.-based pre-IPO research firm Renaissance Capital LLC.
There is an equity orientation in the market, which has welcomed money managers ING U.S. and Artisan Partners Asset Management Inc. ING Groep NV took its U.S. money management unit public on May 2, raising $1.3 billion. Shares were up 46.6% as of July 11. Artisan Partners took in $332 million on its March 7 IPO launch date; shares are up 77%.
Investors in asset manager IPO offerings will look for organic growth, net inflows and exposure to a potentially huge sell-down, especially on the fixed-income side. They'll look at management, distribution, fee sustainability, client loyalty and diversity of equity strategies, Ms. Smith said.
Interest in IPO registration is strong in the financial services sector, with at least one or several asset managers likely to enter the pipeline.
“We are working on more deals in the financial sector now than I can remember in over 20 years,” said Scott Gehsmann, a partner in the Boston office of PricewaterhouseCooper's deals practice.
Silvercrest Asset Management Group LLC, a New York, N.Y.-based financial advisor to family offices, high net worth individuals, endowments, foundations, and institutional investors went public on June 27, with 4,790,684 shares of its Class A common stock priced at $11 per share, below the expected range of $12 to $14 per share. The IPO netted $53 million. Shares were up 14.4% as of July 11.
Driving interest in public equity are new capital requirements, margin pressures and positive investor sentiment around equities, Mr. Gehsmann said.
Under Mr. Bain's leadership OMAM shed nine of its eighteen affiliates. In late 2011 the firm sold back its 100% stake in affiliate Lincluden Investment Management. A month later OMAM sold approximately $2 billion in OMCAP Investors mutual fund assets to Touchstone Investments.
In May 2012, OMAM's Dwight Asset Management unit, with $33.2 billion under management, was sold to Goldman Sachs Group Inc. At the end of last year, OMAM completed the simultaneous structured sales of five of its U.S. affiliates to their respective senior management teams. The five affiliates, with combined assets under management of $12 billion as of Sept. 30, 2012, are 2100 Xenon Group LLC, 300 North Capital LLC, Analytic Investors LLC, Ashfield Capital Partners LLC and Larch Lane Advisors LLC.
As a result of the restructuring, OMAM is devoting more time and resources to its core affiliates.
Streamlining also resulted in addition through subtraction. The sale of OMAM's unwieldy retail business to Touchstone eliminated a substantial operating loss. Touchstone has subsequently retained OMAM in a subadvisory role. As a result, OMAM now manages more retail assets than it did when it owned the business itself, Mr. Bain said.
A premium on share prices is placed on asset management firms where employee interests are closely aligned with the company's fortunes, said Jeffrey Margolis, president of Margolis/Kass Advisors a Roslyn Heights N.Y.-based asset management consulting firm.
OMAM's multiboutique model is somewhat of a differentiator among asset manager IPOs, but core benchmarks are more important.
“Investors need to look first and foremost if a company has proven itself able to deliver true investment value relative to indices,” said Mr. Margolis.
If affiliate and central asset manager interests are aligned, it will increase opportunities for client business. That in turn should lead to better valuations due to growth implications, Mr. Margolis said.