Institutional assets represent a shrinking portion of firmwide AUM for money managers that have acquired peers, a Pensions & Investments analysis of the largest recent tie-ups in the industry shows.
P&I reviewed large-scale money manager combinations that include Invesco Ltd.'s 2019 acquisition of OppenheimerFunds Inc., as well as Henderson Group PLC's purchase of Janus Capital Group Inc., Standard Life PLC's acquisition of Aberdeen Asset Management PLC and Amundi Group's deal to buy Pioneer Investments, which all occurred in 2017.
Among the five completed deals — including State Street Corp.'s 2016 acquisition of GE Asset Management, which made GEAM a part of State Street Global Advisors — institutional assets declined as a percentage of total AUM for acquiring firms. The analysis also found that firms facing outflows before their combinations did not see the bleeding stemmed or reversed through unions with other money managers.
Lee Beck, managing partner at Kudu Investment Management LLC, a New York-based capital provider for asset and wealth management firms, said that money manager consolidation has not proven to help firms that have struggled on their own, only to "prolong the inevitable," in most cases.
"If you do not have differentiated performance or investment acumen, you are not escaping the concern that institutions are not going to give you capital," Mr. Beck said. "Those are the drivers to success."
State Street and Amundi were the only purchasers to see their share prices increase from the date of their deal announcement through Feb. 27, a period P&I tracked for all firms. State Street's stock returned 4.4% during the period, while Amundi's stock returned 10.5%. In addition to providing asset management services through its SSGA operations, State Street also offers investment servicing, custody and investment research and trading services to clients.
Data was also collected for Franklin Resources Inc. and Legg Mason Inc., which announced last month that the firms were combining.
Share prices for the publicly traded money managers were reviewed as the stock market began its nosedive last month as a result of concerns about the containment of the coronavirus and its impact on the economy. By March 12, the S&P 500 entered a bear market after rapid declines, as did the Nasdaq Composite and Nasdaq 100 indexes.