M&G Investments is already synonymous with European private markets in money management circles, but CEO Joseph Pinto wants more.
Just over 18 months into his role at the helm of the more than £312 billion ($397.4 billion) asset manager, London-based Pinto has reorganized the £73 billion private markets business across six verticals (private credit, structured credit, real estate, impact and private equity, infracapital, and responsAbility — an emerging markets-focused impact investor) and expanded the European real estate offering beyond its core and core-plus capability through a majority stake in BauMont Real Estate Capital. M&G acquired a 65% stake in the Western Europe-focused value-add manager earlier in November.
“We are looking at some bolt-on acquisitions — relatively small (opportunities,” Pinto told Pensions & Investments. “We are not looking at big stuff to buy,” but rather want to bring investment capabilities in-house and grow from there.
And while competition among private markets houses — and traditional money managers looking to acquire them — is hot right now, M&G has a card up its sleeve: captive insurance company Prudential U.K.
Prudential acquired M&G Investments in 1999, brought it together with its U.K. and European business in 2017, and then demerged that combined business in 2019, listing the firm on the London Stock Exchange. But having that U.K. insurance business as part of M&G is a powerful thing, Pinto said.
Conversation with potential acquisition targets “always starts” with the balance sheet of the captive insurer. “That commitment has been one of the biggest currencies in all the conversations we have,” Pinto said.
The management team will look at the needs of third-party clients, “but very quickly we involve our CIOs at the insurance company, and make sure it fits their asset allocation.”
The insurance company will then do its own due diligence, compare notes with M&G’s senior leadership, and “make sure that we are aligned, because they then have to commit and invest into the business,” Pinto said.
So, where is Pinto looking for small, bolt-on acquisitions?
In private debt, “we need to enlarge,” he said. He declined to comment on specific targets.
M&G is also working to further internationalize its business.
“It’s been announced many times we have been recruiting. We keep recruiting … to internationalize our business,” adding investment professionals in Europe and in Asia — a key focus for the firm where it manages $8.7 billion in Asian real estate, for example. The Asia AUM is about $10.5 billion in total, he said.
Taking global products to external clients has also reached the U.S., where Pinto knows that especially U.S. fixed income is “extremely competitive. There are so many … U.S. competitors (that are) very powerful, very big … Why are we going there? When we speak to clients, they very much appreciate what we do in Europe. We started with the fixed income and credit journey in the public markets, with … a very solid investment process, a strong philosophy,” he said.
The firm will always focus on what its clients want, be it standalone U.S. credit or European exposure. “But … we want to go after the global category — likewise for the private market. So the word ‘internationalization’ for us means having a more global product.”
The firm’s active management focus is based on research. “If you want to generate alpha, that is the price you have to pay,” Pinto said, adding that the firm has about 100 staff in research. “That is the backbone of M&G — our investment capability.”
Adding in Asia
In Asia, M&G has been gaining ground — with a jewel in its crown a recent hire by the world’s largest pension fund, Government Pension Investment Fund, Tokyo. The fund, which had ¥248.2 trillion ($1.6 trillion) in assets as of Sept. 30, named M&G as one of its active managers in January.
And while Pinto has ambition to do more, he also wants to be realistic and thoughtful about expansion in newer markets.
“We are below what I call our fair marketshare in general. So I don’t want to be arrogant and say ‘we’re going to get everything.’”
Moving from having zero marketshare to 1.5% or even 2% marketshare would be a big change, for example. “Frankly, moving to 2% — it’s almost like doubling the size of the company. So let’s get that right. Then, we can have another conversation,” Pinto said.
Pinto is also looking at China “as a potential distribution country. We’ve been discussing with large partners whereby they want to equip their Chinese domestic retail customers with non-Chinese products,” he said.
Pinto was in China about six months ago “to effectively start conversations with two financial partners,” but added that the firm is not looking to open any office in the market.
“I want to be clear: partnership. We are still working out the details of how to create the right vehicle,” he said. “We want to make sure we do our own due diligence as well … on the way the product will be sold, the suitability of the product with the clients. But we are quite optimistic — and if it’s working well, they may want to look at further strategies,” Pinto added.
Overall, the ambition “is to become a bigger player for sure — but it’s hard to call yourself global when you are not in the U.S.” in a big way, Pinto said.
The firm has about $13 billion in U.S. fixed income AUM, and also a team in Miami covering private banks for non-residents in the U.S. But M&G doesn’t have 40 Act funds, he said.
“We don’t feel the necessity to do it now — we need to succeed in Europe and Asia first, as it’s more natural to us. Then more and more U.S.,” Pinto added.
Other recent hires include by U.K. pension fund pool LGPS Central, Wolverhampton, which committed $257 million into the M&G Real Estate Debt Funds, and by Pensioenfonds Metaal en Technicek, The Hague, and Pensioenfonds Metalektro, Groningen, Netherlands, which jointly committed a total $428 million to the M&G European Living Property Fund.
Role for technology
Pinto is also thinking about the role of technology, and disruptive technology in particular, in the world. “We have a number of pilots in the area to test it” and its use.
M&G’s global Maxima strategy, an equity quant product, has just under $1 billion and was launched due to demand from South Africa-based clients, he said. For that strategy, 70% to 80% of the investment process is AI-based. “We want to promote it to a larger audience and see if we want to create more products,” he said.
Outside of investment, artificial intelligence’s role in product reporting and working on RFPs is also a focus.
“It’s more a topic of efficiency, but also (applies to) topics relevant to our value chain,” such as dealing with asset servicers.
Real estate is also a focus for M&G, comprising about 13% of its total AUM, at about £40 billion.
So big is the focus, that P&I's interview with Pinto took place in the showroom for 40 Leadenhall, a landmark almost 1 million square foot office building in a prime Central London location. The building, which M&G acquired in October 2019 from manager Nuveen — although Nuveen was kept on as development manager — is the biggest real asset in the £126 billion Prudential With-Profits Fund.
The 10,000-person capacity building is almost fully let, with the first tenants recently moving in. Law firm Kirkland is taking multiple floors and will be the largest tenant.
40 Leadenhall, which carried a site price of £225 million with a total about £900 million commitment, according to M&G Real Estate's website, is likely to boast the highest private terrace in the City of London, an 8,000-book library complete with its own curator, and exclusive art and sculptures.
Built around a listed London building, the developers and M&G have also worked to keep the site’s history in mind, with nods to its former life as a bell-making location honored with touches such as using old gas pipes in the fabric of the walls to represent bells.
The building was designed by Make Architects — its founder, Ken Shuttleworth, worked on the design of London’s iconic Gherkin building in his previous role at Foster + Partners.
The building also boasts some serious sustainability credentials: Once completed, it’s expected to be 30% more environmentally efficient than current regulatory standards, and is aiming for a number of top sustainability ratings.
