What the Goldman Sachs Takeover of NNIP Means for Investors

VIDEO: What does the Goldman Sachs takeover of NNIP mean for investors and are there more mergers on the way? 

Holly Black 7 September, 2021 | 3:21PM
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Holly Black: Welcome to Morningstar. I'm Holly Black. With me is Ronald van Genderen, he's a fund analyst at Morningstar. Hello.

Ronald van Genderen: Hello, Holly.

Black: So, big news in the fund industry at least Goldman Sachs has taken over NNIP, what's going on?

Genderen: Yeah. So on August 19, Goldman Sachs announced the acquisition of NN Investment Partners or NNIP. The deal actually was no surprise as NN Group, the parent company of NNIP in April of this year indicated that they were reviewing the strategic options for their asset management arm. And this clearly included the possible sale of the unit. The goal of the review was to create a broader platform for NNIP that should accelerate growth. And over the past month, it's became clear that selling the entire business would be the most likely outcome of that process with several large asset managers showing interest. So for Goldman Sachs, on the other hand the acquisition means doubling of their operations in Europe with addition of around EUR300 billion in assets and with takeover they also add capabilities like responsible investments, fixed income and multi asset solutions.

Black: So it's big for both of these companies. But what does it mean for investors, will it affect them at all?

Genderen: Yeah, possibly, I think investors should be on the lookout for at least two issues. Those are turnover among investment personnel, and changes to the product lineup. A takeover may cause a period of unrest among the personnel of the acquisition target in this case NNIP as it might start questioning like, what are the plans of the new owner? Will there be layoffs? What will this mean for my career path or opportunities? And do I want to work within a larger company with maybe a very different culture. Eventually this may cause people to leave eventually the firm and investors should be keeping a close eye on the stability of the investment teams that are running their funds. And then there is the product lineup, there might be an overlap in products of the combined companies, which is the case for Goldman Sachs and NNIP. So this might trigger fund mergers or liquidations, and more under the hood investment approaches or processes might be changing as well. So as an investor, you want to keep track of that. Now the deal has just been announced and is likely to close in the first quarter of 2022. So we haven't seen any impact yet. And for now, we have maintained the parent pillar score of NNIP and Morningstar analyst ratings for all of covered (indiscernible) unchanged.

Black: So takeover always feels like quite a big thing. Does it happen often though, and should we be expecting some more consolidation in the industry?

Genderen: Yeah, it certainly does happen more often. And we have seen several high-profile acquisitions and mergers in the asset management industry in recent years. To name a few. Franklin Templeton bought Legg Mason, Jupiter purchased Merian Global Investors, and Morgan Stanley acquired Eaton Vance and meanwhile Standard Life and Aberdeen Asset Management merged as well. So this increased level of activity is driven by several trends. To name a few, firstly there's desire for scale, to overcome fee pressure on the one side and on the other hand increased costs, for example, due to regulatory requirements, technology spending. And then secondly, low interest rates provide cheap finance which makes it more attractive to do acquisitions. As these circumstances are not likely to change soon, we do expect more consolidation going forward.

Black: Fantastic. Ronald, thank you so much for your time. For Morningstar I'm Holly Black.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Holly Black  is Senior Editor, Morningstar.co.uk