Amundi, Allianz and the vagaries of M&A #NewsMarket

One damp squib to start: The UK’s biggest wealth manager St James’s Place is abandoning its ritzy annual staff gatherings at London’s O2 Arena in favour of an online company meeting in January, as it races to cut costs and repair its corporate image.

And one big interview: Andrew Ballschief investment officer at bond giant Pimco has warned the fallout from a trade war launched by Donald Trump could drive Eurozone interest rates back down towards “emergency levels” as policymakers seek to soften the blow on the bloc’s struggling economy.

In today’s newsletter:

• Allianz pauses talks with Amundi to form €2.8tn asset management giant

• New ‘anti-woke’ ETF makes Starbucks its first target

• Public pension plans and wealth funds to invest more in private markets

Allianz pauses dealmaking talks with Amundi

As recently as Saturday morning Amundi and its majority shareholder Credit Agricole were in exclusive talks with Allianz over plans to combine the German insurer’s €560bn investment management arm with its larger French rival.

A deal — which was projected to value Allianz Global Investors at north of €6bn — would have marked the culmination of more than a year of on-and-off discussions between the two sides, and formed a European giant with almost €2.8tn of assets under management.

On Saturday afternoon, Allianz unexpectedly paused the talks, Olaf Storbeck and I revealed later that day.

The hiatus — which may prove temporary — illustrates the difficulty of pulling off large-scale mergers and acquisitions in asset management and comes as a wave of consolidation is sweeping across the industry.

One recent deal that has left almost everyone in Europe casting an eye around for potential dance partners is BNP Paribas’s €5bn acquisition of Axa Investment Managers to create a €1.5tn European champion. (Amundi also held talks to buy Axa Investment Managers earlier this year, but the two sides were not able to agree terms.)

For years investment managers around the world have been turning to M&A to pursue scale, growth markets and new clients as margins are squeezed by higher costs and lower fees. In Europe right now the pressure is particularly acute because of the continued march of the large American firms — think BlackRock, Goldman Sachs Asset Management and JPMorgan Asset Management — into the European market.

Meanwhile, a further driver of consolidation is that banks and insurers are weighing up their commitment to their investment management divisions and evaluating the merits of doubling down (Legal & General), striking strategic partnerships (General) or quitting the business altogether (NN Group).

The key sticking points between Allianz and the Amundi camp appear to be the structure of any tie-up and a struggle to agree on who would have control of an enlarged entity. Of course scale for scale’s sake is not enough, and so far neither side appears to have publicly articulated what the strategic logic of a tie-up was for their clients.

Others said that while Amundi saw a potential transaction as an “acquisition” of Allianz Global Investors, the Germans wanted a partnership that would help increase its income from asset management.

As Rene Magritte might have said on Allianz’s behalf: “This is not an acquisition.”

New ‘anti-woke’ ETF sets Starbucks in its sights

Wall Street investors are aiming to cash in on a conservative shift as Donald Trump returns to the White House.

A new fund aiming to punish “woke” companies is just the latest example of this, write my colleagues Amelia Pollard and James Fontanella-Khan in New York.

Last week Azoria Partners announced a new actively managed fund, which will exclude S&P 500 companies that incorporate diversity, equity and inclusion considerations into their hiring processes.

Its first target? Starbucks. Azoria’s founders revealed this on Thursday at an event at Trump’s Mar-a-Lago resort in Florida, attended by Ark Invest founder Cathie Wood and Kevin Robertsthe ideologue behind the Project 2025 blueprint for Trump’s government.

“Americans, whether they voted for president Trump or not, do not want to invest in companies running woke science experiments,” Azoria co-founder James Fishback said in an interview, referring to hiring practices that factor in diversity. “We are representing shareholders here, and human capital hiring quotas — that hurts all shareholders.”

Fishback’s fund does not manage any money yet, meaning the Starbucks campaign lacks the financial heft to influence the retailer’s decisions. Powerful activist fund Elliott Management recently built a large stake in the chain, helping to spur replacement of its CEO earlier this year.

Unlike an activist hedge fund, which buys stakes in companies to agitate for change, Azoria will push its agenda by excluding companies from their index and publicly claim DEI policies are hurting their stock price.

The strategy borrows from so-called environmental, social and governance funds, which excluded investments in polluting industries and were attacked by many conservatives.

Is anti-woke investing a fad or a legitimate moneymaker? Email me: [email protected]

Chart of the week

Public pension schemes and sovereign wealth funds plan to pour more money into private markets over the coming year, despite warnings from financial watchdogs about the risks presented by the rapid growth of the sector, write Mary McDougall and Sun Yu.

Half of funds surveyed by the Official Monetary and Financial Institutions Forum (Omfif), a UK think-tank, said they expected to increase their exposure to private credit over the next 12 months, up from about a quarter last year.

Almost 60 per cent of funds said they planned to up their allocation to infrastructure, while more than 40 per cent expected to have a bigger position in private equity. Omfif surveyed 28 pension and sovereign wealth funds globally managing $6.5tn of assets.

The enthusiasm for private markets comes despite a flood of money that investors have already poured into these assets in the years since the 2008 global financial crisis in search of higher returns and lower volatility, raising concerns about a potential bubble.

“Public funds are going to continue in aggregate to allocate more to private markets until something bad happens,” said Paul O’Briena trustee of the $11.2bn Wyoming Retirement System. “Nothing bad has happened yet.”

The California Public Employees’ Retirement System this year adjusted its strategic asset allocation to try to boost returns by increasing its target private equity exposure from 13 per cent of the fund to 17 per cent, while its private debt target increased from 5 per cent to 8 per cent.

Meanwhile, AustralianSuper’s annual report this year said “unlisted assets are expected to outperform listed equivalents over the medium to long term”.

Five unmissable stories this week

BlackRock has agreed to buy HPS Investment Partners in a $12bn deal, as the world’s largest money manager races to expand its share of the fast-growing and lucrative market for private investments.

Mubadala Capitalthe asset management arm of Abu Dhabi’s state investment fund, is acquiring a large stake in Los Angeles-based credit manager Silver Rock Financial as it seeks to build a global player in private capital based in the Middle East.

Hedge funds including Jeffrey Talpins’ Element Capital and Kenneth Tropin’s Graham Capital Management have made big gains from betting on market swings around last month’s US presidential election.

The UK’s pensions lifeboat, the Pension Protection Fundhas wiped £283bn off its estimates for the funding level of defined benefit pension schemes, but said their net funding position remained “strong”.

Investors have pumped almost $140bn into US equity funds since last month’s election as traders bet Donald Trump’s administration will unleash sweeping tax cuts and reforms in a boon to corporate America.

And finally

Naomi Campbell has become the first model ever honoured with a retrospective at the Victoria and Albert Museum — Naomi: In Fashion. Meanwhile I’m also planning to book tickets for VOGUE: Inventing the Runwaya new immersive exhibition at the Lightroom in London’s King’s Cross. Narrated by Cate Blanchettit explores the history of the fashion runway show.