Goldman Sachs’s asset management unit has agreed to buy Dutch insurer NN Group’s investment management arm for about €1.6 billion, marking the Wall Street bank’s largest acquisition since David Solomon became chief executive in 2018.
The deal for NN Investment Partners, which has $355 billion (€304 billion) of assets under management, will significantly expand Goldman’s presence in European asset management and is the latest example of the consolidation that is sweeping across the industry.
It is also a further sign of Mr Solomon’s determination to grow the US bank in areas that earn regular fees, such as asset and wealth management, while reducing its reliance on volatile businesses such as equities and bond trading.
Acquisition strategy
Mr Solomon said that the acquisition “helps us scale our asset management platform, particularly by strengthening our position in Europe”.
Goldman Sachs Asset Management, which has $2.3 trillion in assets under supervision, beat Frankfurt-based asset manager DWS in the final round of bidding to clinch NN Investment Partners. UBS Asset Management, Janus Henderson and US insurer Prudential Financial had also registered interest.
“Everything that NN does, we already do, and this is adding and accelerating our growth . . . and continues to help us scale,” said Mr Solomon.
Asset managers globally are pursuing scale to shield profits from rising costs and falling fees. Solomon said Goldman would “certainly take a serious look” at further acquisitions in asset management, if they could accelerate its growth.
“The asset management industry continues to consolidate,” he added. “If you look at most of the leading players, the thing that most of them have is their businesses are global and at scale.”
Of NN Investment Partners’ assets under management, $190 billion is managed on behalf of its insurance parent company, with the remainder run for external investors.
NN Group will now become a client of GSAM, bringing the total amount of outsourced insurance advisory business that it manages to $550 billion. “Being a partner with the NN Group on their insurance assets going forward was an attractive opportunity for us,” said Mr Solomon.
NN Investment Partners has a strong position in environmental, social and governance investing, notably in areas such as green bonds, impact equity and sustainable equity. “We’re focused on responding to our clients’ needs and desires around ESG,” said Mr Solomon.
Revenue generator
Goldman reported record revenue from asset management in the second quarter, but only about a quarter of this came from managing assets on behalf of clients – the part of the business it wants to expand.
The bulk of the revenue was generated by investments that Goldman had made with its own capital, a source of income that the bank is trying to shrink.
NN Group, which is based in The Hague, came under pressure last year from activist hedge fund Elliott Management to improve returns and streamline its operations.
It said in April it was considering options for its investment management business, including a merger, joint venture or a partial divestment of the division, which has more than 900 employees in 15 countries.
The insurance sector as a whole is grappling with a prolonged period of low interest rates and higher capital requirements under Solvency II rules, which is prompting groups to weigh up where they allocate their capital, and retreat from subscale asset management divisions. – Copyright The Financial Times Limited 2021
