Asset manager
Management buyout at Hayfin, joint venture at Schroders and M&A deal between Axa and BNP
By Philipp Habdank, Frankfurt
The management is being taken over by the financial investor Hayfin, the asset manager Schroders is founding a joint venture with the insurance group Phoenix and Axa is selling its entire asset management to BNP Paribas. That’s three big deals between asset managers within a week. All of them related to the private markets. What’s behind it?
Hayfin is a US investor that has been active in Germany since 2012, primarily in the area of private debt. Led by Olaf Hartmann, Hayfin employs six people in two offices in Frankfurt and Munich. Since 2020, the team says it has placed around EUR 4 billion in Europe. Hayfin has already raised EUR 6.5 billion for its fourth direct lending fund, making it one of the largest debt funds in Europe.
Founded after the financial crisis in 2009, the Canadian pension fund British Columbia Investment Management Corporations (BCI) took over the majority of Hayfin almost seven years ago. According to data provider PitchBook, around 40% was recently in the hands of management, which is now taking back the majority as part of a management buyout. The MBO is being supported by the investor Arctos Partners, which, according to the announcement, has subscribed to 100% of the financing.
Schroders partner mit Phoenix
According to PitchBook, Arctos values Hayfin at around 1.2 billion euros in the deal, which is several times higher than when it was taken over by BCI. The Canadians are said to have valued Hayfin at around 250 million euros almost seven years ago, more than tripling their investment. BCI will no longer hold shares in the asset manager in the future, but will continue to invest in various Hayfin funds.
Meanwhile, Phoenix and Schroders are joining forces in London. They are founding a joint venture called Future Growth Capital (FGC). The new manager will initially have 1 billion pounds (around 1.2 billion euros) at his disposal, which can increase to up to 2.5 billion pounds (around 2.9 billion euros) over the next three years.
Phoenix wants to expand private markets
The capital will initially come entirely from Phoenix. The insurer says it is supporting the so-called Mansion House Compact. This is a voluntary commitment by large British insurers to allocate more insurance money to private asset classes. Over the next ten years, however, FGC also wants to raise funds from outside the Phoenix Group and invest a total of between 10 and 20 billion pounds (around 11.6 to 23.3 billion euros) in the private markets.
Phoenix is contributing capital to the joint venture. Schroders is providing the platform for so-called Long-Term Asset Funds (LTAF). This is the British equivalent of the European Long-Term Investment Fund (ELTIF) and is intended to make it easier for private investors to invest in the private markets. Schroders says it manages around 93.7 billion dollars (around 84.8 billion euros) in the private markets sector. Across all asset classes, assets under management are around 866.2 billion euros.
Axa sells Asset Management to BNP Paribas
While Phoenix is making a new private market investment in Great Britain, an insurer in France is selling off its entire asset management business. Axa is in exclusive negotiations with the major French bank BNP Paribas, which wants to take over the business for EUR 5.1 billion. If the deal goes through, an asset manager with total assets under management of EUR 1.5 trillion would be created.
The deal covers Axa’s entire asset management. Part of this also includes the private markets, where Axa invests in real estate, private debt, private equity and infrastructure. According to official figures, Axa’s assets under management in this area recently amounted to around 184 billion euros. While returns in asset management tend to be under pressure across the industry, private asset classes continue to be seen as a growth market.
Alternative assets make a lot out of little
According to a recent study by the management consultancy BCG, the global assets under management in the so-called alternative asset classes totaled 24 trillion dollars. In addition to private equity, private debt, real estate and infrastructure, BCG also includes investments in hedge funds and commodities. At 24 trillion dollars, the alternative asset classes therefore only accounted for 20% of the assets under management in asset management globally. But this one fifth already earned more than half of all income in asset management, at 227 billion dollars.
BCG predicts that assets under management in alternative asset classes will grow to $38 trillion by 2028, with a market share of 23%, on a par with passive investment strategies. With a forecast of $343 billion, alternative asset classes would then account for 57% of global asset management revenues.
Big eats small
It is therefore no wonder that asset managers, insurers and banks are currently trying to get themselves into a good strategic position, especially in the areas of private equity and private debt. According to BCG, these two asset classes will together account for 70% of the income within the alternative asset classes by 2028. Private equity will continue to be the clearly dominant sector at 63%.
But asset managers are facing a problem: to have a chance in the race of the booming private markets, they have to invest. At the same time, traditional asset management is under high pressure on earnings and costs, which in turn requires investments in digitalization and artificial intelligence to achieve efficiency gains. In order to be able to manage both, one thing is needed above all: size.
The merger of Axa and BNP in asset management will create a European heavyweight. However, the combined unit cannot yet compete with the US giants BlackRock or Vanguard in terms of size. To create a European counterweight, Amundi and DWS would probably have to join forces, but this currently seems unlikely. But who knows what Axa and BNP may have set in motion with regard to European consolidation in asset management.
