Regulatory Pressures Give Alternative Asset Management Deals a Boost

In the first six months of this year, the number of mergers and acquisitions worldwide has jumped 22% from the same period in 2009, spurred by major regulatory initiatives, a recent study by Freeman & Co. reveals.

(September 14, 2010) — For the first time ever, alternative asset management deals are expected to outpace traditional fund manager transactions in 2010.

As regulatory pressures, including the so-called Volcker Rule, push banks to rid themselves of hedge fund and private equity assets and managers encounter greater pressure to consolidate to manage costs, alternative asset management deals — including divestments by banks like Citigroup and Bank of America — more than doubled to 52 in the first half of 2010, according to a report by Freeman & Co.

The report concluded that alternative manager deals should exceed 100 by the end of the year, while traditional manager deals may only reach 70-75 transactions in 2010. According to the research by Freeman, an independent advisory firm focused on the financial services sector, the number of mergers and acquisitions globally in the asset management industry in the first six months of this year have jumped 22% from the same period in 2009.

The heightened activity within the alternative space is also reflected among US corporate pension plans. A separate study by SEI of 85 pension executives overseeing assets ranging in size from $25 million to $10 billion has indicated that more US corporate pension plans are investing in alternative investments, with 65% saying they have money invested in those assets, an increase from 53% in 2009 and 51% in 2008. The study revealed the most common alternatives strategies used were real estate, with 77% of those invested in alternatives; private equity (54%), hedge funds of funds (47%), and single-manager hedge funds (30%).

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“Funding deficiencies are getting the attention of various stakeholders in companies and, as a result, boards and senior management are looking for long-term strategies as this scrutiny continues,” said Jon Waite, Director, Investment Management Advice and Chief Actuary for SEI’s Institutional Group, in a release. “A plan’s funded status is the top priority as liabilities are being managed within a larger, organizational, risk management framework. In particular, alternative investments are being integrated into the portfolio as another channel for mitigating overall risk, while providing additional return.”

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

A coalition of investors is putting pressure on stock exchanges to require listed companies to report how environmental, social and governance (ESG) factors into their business strategies.

(September 14, 2010) — A group of institutional investors, with approximately $558 billion in assets under management, is pushing global listing authorities and stock exchanges to demand that sustainability reporting become a part of their listing rules.

To date, the coalition includes Aviva investors, French reserve fund FRR, SNS asset management, Triodos Investment Management, Mn Services, The Co-operative Asset Management and Northwest & Ethical Investments.

According to a statement by Aviva Investors, this coalition of investors will write to the CEOs of stock exchanges to make their demands, part of an engagement initiative launched by Aviva Investors and facilitated by the UN-backed Principles for Responsible Investment (PRI) in 2009. The mission of the group is to encourage a global listing environment that requires companies to become more mindful of a sustainability strategy.

“We…believe that stock exchanges can play a crucial role in helping to create more sustainable global capital markets because of their ability to directly influence and monitor the operations and strategy of companies seeking to access the equity markets. We are sending a strong signal that, all things being equal, Aviva Investors would prefer to trade on stock exchanges that maintained this listing provision,” said Paul Abberley, CEO of Aviva Investors London, in a statement.

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James Gifford, Executive Director of the PRI added: “Disclosing ESG performance data in a systematic way gives investors additional confidence that a company is effectively managing its risks and opportunities. The Sustainable Stock Exchanges initiative, which is led and supported by investors, points to a clear business case for global stock exchanges to play a role in promoting transparent and sustainable financial markets.”

Yet, excluding changes at the Singapore, Johannesburg and Istanbul Exchange, Aviva Investors has said it is still waiting to see a serious commitment from stock exchanges to make noticeable changes.

Separately, the Institutional Investors Group on Climate Change (IIGCC) has outlined a list of guidelines to help pensions understand climate-related risks and opportunities in their portfolios. A report released in June by the IIGCC revealed that twice as many investors are asking stock and bond managers about their global-warming policies compared to two years earlier. However, integration of these policies into investment mandates has been slow to takeoff.

“The fact that asset owners now question their asset managers about their climate change policies prior to making a selection is a clear signal of increased awareness on climate change in the investment community,” said Ole Beier Sørensen, the new chairman of IIGCC. “This progress will be further strengthened if attention to climate change is applied throughout the decision‐making process, from investment manager selection to Investment Manager Agreements.”

The London-based Institutional Investors Group on Climate Change has 58 members who manage about 5 trillion euros ($6 trillion) of assets.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742