Pendal’s new boss Nick Good says the international market offers better opportunities for growth, following the group’s acquisition of a US-based value manager, which cements the ASX-listed investment firm’s status as a global player.
Once an Australian-focused fund manager, Pendal began its foray into international investing in 2011 with the acquisition of London-based equity manager J O Hambro Capital Management (JOHCM).
Pendal cements its US expansion by acquiring TWS. Credit:AP
A decade on, Pendal has announced it will fully acquire Virginia-headquartered value manager Thompson, Siegel & Walmsley (TSW) in a $US320 million ($413 million) deal that’s expected to be completed by September.
Mr Good, who took the reins at Pendal in March after longstanding CEO Emilio Gonzalez stood down, said both acquisitions were motivated by the need to diversify the group’s operations and also open up opportunities in bigger markets.
“If you look at the firm over the last 10 years, it’s been the markets outside of Australia that have grown,” he said. “Our assets are outside of Australia, our profitability, our revenue is outside of Australia. We really are a global manager at this point.”
Where JOHCM was largely a growth investor (identifying small companies that are poised to see exponential growth), TSW is a value manager (picking stocks trading at depressed prices). Mr Good said the TSW acquisition was an important addition to the group.
“The scale of international and global equities now spans both growth and value. That balance is really important.”
The deal came as Pendal reported its half-year results, with statutory profit up 64 per cent to $89.9 million compared to the same time last year and shareholders set to receive an interim dividend of 17 cents per share, up 13 per cent.
Around 83 per cent of Pendal’s assets beat the benchmark over the 12 months to March 31, as market conditions improved following the COVID-19 downturn.
Mr Good said key to the group’s “robust performance” was allowing fund managers to have full control over investment strategies and philosophies, after appointing TSW’s chief executive John Reifsnider as the chief of the group’s US business.
“We are a board church. We accept a wide array of investment styles. But at our core, we believe in investments first,” Mr Good said.
The takeover will more than double Pendal’s US footprint to $US44.7 billion in assets under management, making it the largest contributing country. Total assets under management will swell by 30 per cent to $132 billion after the deal is completed.
Mr Good said America under US President Joe Biden had not resulted in noticeable changes to the investment landscape, despite record levels of stimulus funding.
“I don’t think the investment landscape has changed hugely,” Mr Good said. “There is a bit more appreciation of ESG [environment, social, governance] and responsible, sustainable investing. But those trends were there before.
“Whilst obviously there are some questions about tax and how that might impact things, I don’t see a significant shift in our clients or how they’re thinking about investing.”
Pendal shareholder and Atlas Funds Management chief investment officer Hugh Dive said the strength in the acquistion comes from the variation in investment styles and assets that it will bring to the group.
However, Mr Dive was concerned about the lack of management retainment clauses, warning there could be a talent drain if this was not managed properly. “Within funds management, I’m generally pretty suspicious.”
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