Year of the Ox reflections: The fund house mega mergers of 2021
Every Chinese New Year, AsianInvestor makes 10 predictions about the economic, political and financial developments and trends that could impact global markets and asset owners in the 12 months to come. As we move forward into the new Year of the Tiger, we take a look back at how accurate some of these predictions were about the Year of the Ox.
Will we see at least two mega-mergers in the investment industry this lunar year (deals that form asset managers with at least $1.5 trillion under management)?
Answer: Yes
Verdict: Correct
Investors hunting for strategic market advantage through better technology, innovation and more sustainable investments continued to fuel mergers and acquisitions across the financial services industry.
In August 2021, Goldman Sachs announced that it would acquire NN Investment Partners for $1.9 billion from NN Group. The acquisition added $355 billion in assets under management to Goldman Sachs's balance sheet of well over $2.3 trillion in assets.
The asset and wealth management sector is a leader in responding to many of the complexities of environmental, social and governance (ESG) issues. With NN Investment Partners offering a broad range of equity and fixed income products with strong ESG integration across its business, the acquisition allowed Goldman Sachs to accelerate its growth strategy and broaden its asset management platform to meet client demand for sustainable investments.
A second high-profile announcement during the year was T. Rowe Price Group Inc's $4.2 billion acquisition of private credit manager Oak Hill Advisors LP, which added $53 billion to its $1.63 trillion of assets under management.
The acquisition, which was announced on October 28, 2021, accelerated T. Rowe Price's expansion into alternative credit markets, enhancing its existing platform and ongoing strategic investments in its core investments and distribution capabilities.
"This acquisition allows us to broaden our private markets business and add new capabilities in an area of tremendous client interest and growth," said Rob Sharps, T. Rowe Price president, head of Investments, group chief investment officer in an official statement.
Financial services deal volumes increased between 2020 and 2021 by 21%, with values up by 40% in the same period. The new year has started with deal activity remaining at elevated levels across all regions, according to PwC’s Global M&A Trends in Financial Services: 2022 Outlook
The growing importance of private equity in the sector is clear. Its equity involvement in these deals increased during 2021 to 30%, up from the average over the previous five years of 20%.
PwC believes deal-making in the asset and wealth management sectors will continue to thrive in 2022 as investors are attracted to the significant future growth prospects and track record of delivering superior risk-adjusted returns.