Opalesque Industry Update – Freeman & Co., a leading independent advisor to the financial services industry, released the 24th edition of its asset management industry overview covering transaction activity and opportunities for growth in the current high-volatility, low interest rate environment.|
Freeman & Co. reports 57 asset management deals were announced globally in the first two quarters of 2012, consistent with 57 deals announced over the same period in 2011. Full year activity measured by number of transactions is projected in-line with historical averages, while AUM transaction size in 2012 should match or exceed 2011 levels by 10%.
“Activity has been flat to down year-to-date, with market volatility affecting the speed and timing of transactions. However, the second half of 2012 should be more robust with numerous potential large transactions such as business sales by Dexia and the recently announced sale of TCW by Société Générale,” says Eric Weber, Managing Director and COO at Freeman & Co. LLC.
In summary, the report details the following
• Deal Activity/M&A: Global deal activity measured by AUM lagged in the first half of 2012 with $468 billion AUM reported, compared to $1.28 trillion in full year 2011. However the number of transactions was steady with 57 announced transactions, the same as 2011. In the US, there were 32 transactions in 1H 2012, down 22% from 41 transactions in 1H 2011. European transactions included 17 announced asset management transactions, a decrease of 15% compared to 1H 2011.
• Divestitures: 2012’s top deal activity included divestitures from Old Mutual (Dwight Asset Management), Société Générale (Rockefeller Financial Services, 37% stake), and Morgan Stanley (Quilter Holdings). We expect further divestiture activity to come as insurers and banks raise capital and therefore divest non-core businesses, which we believe will increase in 2013.
• Building a Sustainable ETF Franchise: Globally, ETFs continue to see their assets grow, a trend that shows no signs of slowing down. Although there are several predominant players in the space already, opportunities for entry are plentiful, as new entrants seek to satisfy demand for this asset class. ETF growth is expected to continue by as much as 20% CAGR over the next five years. With assets heavily concentrated in funds that track broad market indices, we expect innovative products with a differentiated focus to proliferate, and present the strongest opportunity for newer franchises to grow.
• Searching for Yield: Alternative fixed income products offering attractive risk-adjusted returns present an opportunity in the current low interest rate environment for investors to secure yield. Structured settlement and lottery receivables are examples of two products filling this void. We see the current trend for outside investors as mainly being interested in: (1) buying these receivables directly or (2) providing debt to the originators of these receivables. As traditional banks have pulled-back or exited the sector entirely, new sources of capital are fueling these specialty lenders, providing debt financing, asset purchases, and equity injections.
Founded in 1991, Freeman & Co. has diversified into one of Wall Street's premier providers of independent financial services advice offering mergers and acquisitions and related advisory services, capital raising, underwriting, strategic management consulting and competitor benchmarking data and analysis to the entire spectrum of financial institutions. For more information, visit www.freeman-co.com