Guggenheim Partners has entered “exclusive negotiations” to acquire
Deutsche Bank AG's U.S. asset management businesses, the bank announced today. The acquisition would swell Guggenheim's assets under management to more than $650 billion, up from $125 billion. It would also vault the firm from the 164th largest asset manager into the top 25.
“It's a transformational deal if it goes through,” said Darlene DeRemar, managing director at industry consultant Grail Partners LLC. “Guggenheim isn't considered a major asset management firm today, but this deal would clearly put them in a much better position.”
Deutsche Bank's U.S. asset management business includes the DWS Investments mutual fund family, institutional money manager DB Advisors, Deutsche Insurance Asset Management and RREEF, a global alternative asset management business.
Guggenheim is no stranger to building through acquisitions. It acquired Claymore Group and its exchange-traded fund business in 2009 and purchased Security Benefit Corp. and the Rydex/SGI lineup of mutual funds in 2010. The ETFs and mutual funds were re-branded as Guggenheim Funds last year.
The deal with Deustche Bank would be a “nice complement” to the previous acquisitions, Ms. DeRemar said. The purchase would give Guggenheim a top-30 mutual fund family as well as a global real estate footprint through RREEF.
It's not surprising to see a firm trying to grow through acquisitions rather than organically, said Ms. DeRemar. Other industry watchers agree.
“Overall, the appetite for M&A activity remains high globally, with asset managers finding it difficult to achieve organic growth due to increased competition for assets, volatile asset values, fee pressure and rising compliance costs,” according to a PricewaterhouseCooper LLP outlook report for asset management mergers and acquisitions in 2012, released this week.
DWS' municipal bond lineup could potentially be the highlight of the mutual fund acquisition for Guggenheim, said Flynn Murphy, a mutual fund analyst at Morningstar Inc.
The municipal bond fund management team, lead by Phil Condon, has been DWS' strongest performer — and one that Guggenheim lacks, he said.
Guggenheim launched its first municipal bond mutual fund just last month. The DWS municipal bond funds have about $8 billion spread across three strategies, each of which has at least a 10-year track record that ranks in the top half of its category.
But DWS shareholders have to watch for any management or expense fee changes if the sale goes through, Mr. Murphy said.
