Active Fund Management Isn't Dead Just Yet
Nomura’s purchase of a big US investment manager marks a sensible break from the recent heady auctions for private capital firms.
Nomura Holdings Inc.’s $1.8 billion agreement this week has a lot to do with what’s happening in private equity.
Photographer: Kiyoshi Ota/Bloomberg
It’s quite easy to do bad deals in asset management. Option one, overpay for a private capital business in the aggressive dash for growth. Option two, defensively merge your existing fund manager with a regional peer and botch the integration as you try to make savings. Against that backdrop, Nomura Holdings Inc.’s decision to acquire a cheap US public-markets manager with minimal overlap stands as an oddity. Maybe there’s some logic in buying what everyone else is trying to sell.
The investment industry’s well-known problem is that active fund management is trapped between low-fee passive funds and high-charging alternative strategies promising juicy returns like hedge funds and private equity. This “barbell,” as Oliver Wyman LLC’s Huw van Steenis named the phenomenon, isn’t easy to deal with if you’re already a big active player. Lately, it’s spawned acquisitions of private capital firms. BlackRock Inc. agreed to pay $13 billion for infrastructure investor Global Infrastructure Partners and $12 billion for private credit manager HPS Investment Partners LLC last year — high prices relative to the near-term fee income obtained.