BNY Mellon Asset Management's acquisition of fund units in London and Australia is part of its strategy to expand "opportunistically" overseas — including potentially in Asia — as competitors contract, a top officer says.
Jon Little, a vice chairman at the Bank of New York Mellon Corp. unit, said the two fund units — Blackfriars Asset Management in London and Ankura Capital in Sydney — added only about $3 billion of assets under management but could pay bigger dividends down the road. They were launched Monday as wholly owned units of BNY Mellon Asset Management after a December deal with Germany's WestLB.
Mr. Little said in an interview Monday that WestLB discovered the two fund units "had less to do with Germany and more to do with the type of business we were doing at BNY Mellon."
The German bank realized that "it made less and less sense for them to own these companies and more and more sense for us to own them," he said.
The price was not disclosed.
Mr. Little said a lot of potential acquisition targets, small institutional asset managers, exist globally in different markets.
"This is part of the turndown in the market," he said. "Everyone is looking at what they have and trying to decide what is core and what is not core. We are quite interested in buying smaller businesses from people that want to get out of asset management around the globe."
Mr. Little said Bank of New York Mellon's asset management subsidiary, which had $928 billion under management at Dec. 31, entered a joint venture with WestLB to expand distribution in Germany.
It also is interested in acquiring a fund manager in Asia, he said. "We could certainly do more there, but I wouldn't want to get more specific than that," he said. "I suspect things will get cheaper as we move along from here."
The deal with WestLB was unique, Mr. Little said, because BNY Mellon Asset Management already had a stake in both fund units, but "we are always interested. We are always actively looking at the market. We wouldn't have been interested if their performance wasn't good or if they ran something we already had in-house. We wanted to add to our existing capabilities, and we accomplished that with this deal."
Analysts said the largest custodian banks are looking to develop their asset management businesses internationally. Burton Greenwald, an analyst at BJ Greenwald Associates in Philadelphia, said that Bank of New York trailed Northern Trust Corp. and State Street Corp. in certain markets overseas and that, though this deal did not add significant assets, it offered another indication of Bank of New York's strategy for growth.
"This is a company that wants to make small, strategic acquisitions in order to gain share in specific markets," he said.
Mr. Little said both firms that it bought are "quite small in terms of assets but have enormous scope in terms of impact."
Ankura, which has $674.1 million under management in Australian equities for Australian clients, gave BNY Mellon its first assets under management in Australia, he said. The New York company already managed about $15 billion of assets for Australian clients.
"Australia is one of the fastest-growing regions for pension assets," he said. "We knew we wanted to sell more international products in that region."
BNY Mellon Asset Management sells foreign equities and bonds to Australian customers, but the Ankura purchase means it "can push harder into the domestic portion of institutional investors' portfolios," he said.
Australia is the fourth- or fifth-largest pension market globally, Mr. Little said. Greg Vaughan is to remain the managing director and chief investment officer at Ankura.
The purchase of Blackfriars, which has $2.3 billion under management, gave BNY Mellon Asset Management a unit that specializes in emerging-market strategies, Mr. Little said. Blackfriars focuses on global and regional emerging-markets equities, debt, and global fixed-income assets.
"Emerging-market strategies have suffered in the last year or two but stand up better than they have during previous crises," he said. "There are a lot of great opportunities in this sector, and this is a company that has been delivering great performance. We want to be situated for when these market conditions turn around."
Mr. Little said Blackfriars has gained clients in the past 18 months from Korea, China, and the Middle East. BNY Mellon Asset Management started a Dreyfus fund in December that is subadvised by Blackfriars.
Hugh Hunter is to remain chief executive at Blackfriars. Both companies retain their investment staff and management teams.
