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Freeman & Co: ‘We could see as many as 150 asset management transactions in 2013’

Wednesday, June 05, 2013
Opalesque Industry Update – Freeman & Co., a leading independent advisor to the financial services industry, released the 25th edition of its asset management industry overview covering transaction activity and the changing market environment, including the growth of outsourced CIOs and retail alternatives.

Freeman & Co. reports 51 asset management deals were announced globally in the first four months of 2013, representing a 12% annualized increase over 2012 and marking the second year of double-digit growth in deal activity. In the first four months of 2013 the stock market rallied to record highs and traditional and alternative asset managers in general beat the S&P 500 over the past year.

“The asset management landscape is evolving. Private equity firms are focused on becoming asset managers; large long-only and traditional managers are becoming multi-asset solutions providers; and other creative asset managers are focused on defining a niche. As these firms converge, we could see as many as 150 asset management transactions in 2013,” says Eric Weber, Managing Director and COO at Freeman & Co. LLC.

In summary, the report details the following:

Deal Activity/M&A: At 51 transactions through April 30 (or 153 annualized), 2013 is on track to be the second year of double-digit increases in M&A activity. As of April, this represented a 12% annualized increase over 2012. In 2012, global deal activity included 137 transactions, a 22% increase over 2011.

Evolving Asset Management Landscape: Nearly five years after the market crash in 2008, asset levels have surpassed pre-crisis levels in most developed markets. Unlike the previous market crash in 2002, when returns were supplemented by 3 – 5% annual inflows, this time net inflows remained flat or slightly negative across most traditional asset classes, up until the recent equity market run in the first quarter of 2013. In this report, we highlight different ways firms are seeking growth in a converging asset management environment. We have identified four key themes managers should consider in 2013: solutions, focus on outcomes (for institutional managers), importance of scale (for retail managers), and the convergence in alternative asset classes.

Outsourced CIOs: Outsourced CIOs offer a hybrid solution to investment consultants and manager of manager investing. The defined outsourced CIO market has grown at a ~20% CAGR over the last five years, and continues to grow rapidly. While corporate pensions represent an estimated 52% of the current client base, future growth is expected to come from small and mid-sized endowments and foundations as well as firms specializing in catering to high net worth individuals and families. As new firms redefine their business models as “Outsourced CIOs”, a diverse group of specialized OCIO managers have emerged. M&A activity in this space is in its early stages, with a few private equity led transactions occurring to date.

Alternatives for the Retail Market: Retail alternative products have experienced tremendous tailwinds in recent years, from both an investor demand perspective and from traditional and alternative managers eager to supply product. In the last six months alone, Franklin Templeton, Fidelity and Oppenheimer partnered with alternatives firms to create new products to distribute through existing channels. Alternative firms, such as KKR, Carlyle, Apollo and Blackstone, have recently filed for or have launched products targeting mass affluent investors. As the success of these new ventures becomes apparent, we expect to see continued activity in this space, by means of new product launches, joint ventures, and in some cases, M&A.

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 a full copy of the report or further information please contact: Eric C. Weber, CFA, Managing Director & COO, Freeman & Co., +1 212 830 6162, eweber@freeman-co.com. www.freeman-co.com

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