Natixis acquisition shows robust alts appetite

Natixis Investment Managers is the latest asset manager to snap up an alternatives specialist with its acquisition of private debt manager MV Credit, illustrating just how investor appetite for higher-yielding investments continues to build. 

MV Credit will join Natixis as a fully autonomous affiliate, the French asset manager, said in a statement on Tuesday.

The acquisition is expected to bulk up Natixis’s European real assets range, providing investors with access to a wider range of strategies in private equity, private debt, real estate and infrastructure.

Natixis already has private debt capabilities through other affiliates such as Ostrum Asset Management, which manages leveraged loans and collateralised loan obligations while Mirova offers infrastructure private debt.

MV Credit will remain fully autonomous while being able to access Natixis's global distribution capabilities, a statement from Natixis said.

A spokesman for Natixis IM said the asset manager has seen strong demand from Asian investors for private debt and alts/real assets in general and the acquisition would provide regional investors with exposure to such assets via a new affiliate.

Demand in Asia, as in other parts of the world, has been climbing for alternative assets: HSBC Insurance's Hong Kong unit is eyeing raising its private debt allocation, as is Korea's Public Officials Benefit Association, AsianInvestor has previously reported.

GROWING TREND

The Natixis deal is the latest in a string of mergers and acquisitions between traditional asset managers and alternative asset specialists.

In April, the world’s largest money manager, BlackRock, announced it was acquiring US-based Tennenbaum Capital Partners, which focuses on middle-market credit and special- situation credit opportunities, while a month earlier Clearwater Capital Partners, an Asia-focused credit and special situations investment firm headquartered in Hong Kong, was acquired by Canada’s Fiera Capital.

Alternative asset management deal activity jumped to its highest level since 2008 with 67 deals in 2017, a 40% increase from 48 transactions in 2016, according to a report released in February by US financial firm Sandler O’Neill and Partners.

And deal flow is expected to remain robust in 2018: “In particular, real asset strategies less correlated to the broader market, such as real estate and infrastructure, will be at the top of buyers’ target lists,” the 2017 Asset Manager Transaction Review and 2018 Forecast predicted.             

Demand for alternative asset specialists is part of a broader hollowing out of the mid-tier segment of the fund management industry, according to Keith Pogson, assurance leader in global banking and capital markets at consultancy EY said.

“At one end you have the low-cost, [exchange-traded fund] kind of products that are growing in demand. At the other end, investors are willing to pay for niche investment skills, such as those required to manage alternative asset classes,” he told AsianInvestor.

“The ones in the middle that are picking stocks in traditional equity classes with historically high fee bases, for instance, are the ones that will struggle to survive.”

Some industry participants believe that smaller boutiques (especially if they focus on non-traditional strategies) with a track record of delivering alpha consistently seem likely than ever to thrive, even if they become potential acquisition targets.

That's because the possibility exists that some of these boutiques could be invited to operate under a bigger asset manager -- as the Natixis acquisition shows.

“In essence, a firm could run a mini-boutique under its structure. A lot of specialists are willing to do that as they want the autonomy in setting the strategic direction and building their own businesses, while benefiting from the wider investor reach of a larger asset manager,” said the former Asia head of wealth management at a consultancy, who declined to be named.

Natixis, even before the MV Credit acquisition, already had 25-such specialist affiliates operating under its aegis, the company's website shows.