Insurer Snaps Up Asset Management Arm of Troubled Lender

Amid ongoing sale rumors about Russell Investments, a $513 million acquisition deal has closed between New York Life Investments and Dexia Asset Management.

(February 4, 2014) – Dexia has sold off its asset management arm to New York Life Investments, six months after a deal with a private equity firm collapsed due to missed payments.

The insurer paid $513 million for the division, which manages $100 billion in primarily European and Australian assets. This brought New York Life Investments’ assets under management to $511 billion and expands its reach with offices in Brussels, Paris, Luxembourg, and Sydney.

New York Life Investments handles the insurance company’s general account, and serves as an umbrella organization for its eight boutique asset management operations. These affiliates—Cornerstone Capital Management, MacKay Shields, GoldPoint Partners, among others—together managed $189 billion in external capital as of the end of 2013.

Dexia Asset Management will remain a distinct operational unit, according to the insurer, and current CEO Naïm Abou-Jaoudé will retain leadership. New York Life Co-President Yie-Hsin Hung has been appointed chairman of the division’s board of directors.

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John Kim, vice chairman of New York Life, called the acquisition a “milestone” for the insurance company. “Expanding our asset management business in Europe and Australia represents a significant growth opportunity for New York Life to become a key player in the global asset management arena,” Kim said. He noted that the division would “benefit from the strength, resources, and capital of New York Life.”

Once the world’s largest municipal lender, Dexia suffered catastrophic losses during the European sovereign debt crisis and has been selling off branches of its business.

In July, Dexia announced it had terminated a prior agreement to sell the unit to Hong Kong-based GCS Capital for the same price. “GCS Capital has not been able to meet its contractual payment obligations under the share purchase agreement,” Dexia said, announcing it would resume talks with other interested parties.

The financial institution has been liquidating assets to repay €5.5 billion ($7.4 billion) in bailout money injected by the governments of France and Belgium. In the past two years it has sold off Dexia Bank Belgium, Dexia Banque Internationale à Luxembourg, a private bank in Turkey, and its information technology operation, according to company documents.

“The sale of Dexia Asset Management completes the divestment process of the largest commercial franchises of the Dexia Group,” the firm said February 3. It will now focus its efforts on “ongoing disentangling projects,” managing its balance sheet wind-down, and “ensuring the operational continuity of the group.”

(February 3, 2014) — The $96.5 billion Australian sovereign wealth fund has outlined its mission to enlarge the “tangible” allocation in its portfolio, cutting exposure to listed equities, cash, and alternatives.

In its portfolio round-up of 2013, the Future Fund’s executive outlined plans to turn its current allocation into a “mature portfolio”. In a bar chart, it showed this transition would mean a reduction to various previously core asset classes and an increase to just real assets.

The move would expand the allocation to real assets from a fraction over 10% to just under 20%, and take a larger stake in real assets than it says the “Typical Super Fund” would hold. In previous documents, the fund has referred to property, infrastructure, and timberland as falling into this category.

In its annual report for 2012, the fund said its target “tangible” allocation for 2014 was 16%. Today’s announcement projects further increases in the future. It also said that the benchmark for this section of the portfolio was the consumer price index plus 5%.

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Alternative asset classes are set for reduction under the Future Fund’s plans, with a 19% allocation in 2012 earmarked to be reduced to 16% this year. Today’s announcement saw alternatives already cut to 14% with around another two percentage points’ reduction due to fall in with the mature portfolio.

The Future Fund determines alternative assets as “Skill-based absolute return strategies and other risk premia providing diversity of return streams,” and does not include private equity or real assets under that banner.

In August last year, Future Fund CIO David Neal told the Australian Financial Review: “We are not in bubble territory. The market doesn’t feel frothy or bubbly.” Neal was defending criticism of the price paid for a stake in Perth airport earlier in the year.

Debt and private equity holdings look set to remain at current allocations.