Goldman Sachs Asset Management announced Wednesday it had agreed to buy Deutsche Bank’s stable value business, confirmed Andrea Raphael, a spokeswoman for GSAM.
Terms were not revealed. The deal is expected to close during the first quarter of 2014.
Deutsche Bank’s stable value business had $21.6 billion in assets under supervision as of June 30, overseen by its Deutsche Asset & Wealth Management unit.
This acquisition is the second big effort by GSAM to expand its defined contribution business. Last year, GSAM acquired stable value money manager Dwight Asset Management from Old Mutual Asset Management.
GSAM has more than $55 billion in DC assets, including more than $34 billion in stable value assets under supervision. A GSAM news release issued Wednesday said assets under supervision include client accounts for which Goldman Sachs does not have full discretion.
The Deutsche Bank acquisition “broadens our exposure” to the defined contribution market, said Craig Russell, managing director and head of GSAM’s Americas institutional business, in an interview. He declined to comment on the proposed purchase price or the history of the negotiations between GSAM and Deutsche Bank.
Mr. Russell said the Dwight acquisition, the pending Deutsche Bank deal and the July announcement that GSAM planned to create a new stable value fund demonstrate “we’re sending a signal to the market about our commitment” to defined contribution plans.
In an internal memo obtained by Pensions & Investments, Deutsche Bank officials described the sale of the stable value business as a strategic decision. “As you know, we are investing significantly in our Americas business to provide clients with a broad range of investment solutions across fixed income, equity and alternative asset classes,” said the memo from Jerry Miller, managing director and head of Americas for Deutsche Asset & Wealth Management, and Randy Brown, co-chief investment officer. “However, as we focus on growing the rest of our platform — including our retirement business — we have opted not to participate in the consolidation of the stable value industry.”
Renee Calabro, a Deutsche Asset & Wealth Management spokeswoman, declined to comment.
“Many of you will be aware that the stable value sector is undergoing significant change,” the memo said. “A number of sizable players have exited the space in recent years. We have a strong stable value offering and can be proud of the service we have delivered to clients over the years. However, given the unique nature of the product and the industry changes taking place, we have chosen to direct our investment spending to growing our other businesses.”
As part of the deal with GSAM, John Axtell, managing director and head of stable value at Deutsche Asset & Wealth Management, will join GSAM, as will “other key members of the … stable value management team,” the memo said. The memo didn’t identify the other members.
