Asset management buying opportunities for multi-affiliates

BNY Mellon Asset Management sees the financial crisis as a time of opportunity to increase its range of multi-affiliate firms through acquisition, according to its chairman, international, Jon Little.

“There are three main types of opportunity at the moment,” he says.

“There are the banks and financial institutions which are bombed out have to dispose of businesses or there are other asset managers who may have to do a deal (sell) in order to survive … They are out there and I think we will get some deals done,” he says.

“Then there are the large commercial banks which may look to sell some non-core assets, such as asset management or custody operations. There are some European banks that have 30 ‘core’ businesses.”

“And then there are some businesses, some hedge fund managers, boutiques and private equity managers, who could have carried on but who have been scared by the crisis. Their prime brokers may have gotten into trouble or they have had to support their fixed interest positions or with equity managers they’ve had to make cuts and they see this is not as easy as growing a business.”

He says, however, that a lot of owners are still thinking about 2006 prices for their firms.

“They are asking for 9-10 times earnings when the quoted (listed) managers are trading at six times.”

BNY Mellon, like other multi-affiliate managers, is better placed than many larger institutional managers to weather the financial storm because of the diversity of its strategy range and the different business models among the affiliate base.

Multi-affiliate firms, such as Affiliated Managers Group, Legg Mason and Old Mutual, allow their managers a high degree of autonomy and either profit share or direct share ownership.

Little says that some of BNY Mellon’s firms, such as Newton and Walter Scott, have done well because of their fundamental equity approach which led them to avoid financials at their peak.

“I think there will be a back-to-basics philosophy among investors,” he says. “The equity markets are looking like such a good buy… But most clients are trying to take stock. We have a lot of mandates which have been awarded in the past few months but still haven’t been funded. There are a few who are being adventurous but we are seeing less than I would have thought we’d see. People will (invest) but it needs a groundswell of confidence which is just not there yet.”

He also says there are some opportunities in the hedge fund area such as long/short equities, merger arbitrage and distressed debt.

“We would be interested in doing those, although we probably wouldn’t own them 100 per cent – we’d take an interest.”