What does the Schroders acquisition mean for Cazenove Capital?
The City was stunned last Thursday, after one of London’s oldest financial institutions entered a surprise mega deal with an American investment firm.
Schroders announced it had agreed a £9.9bn takeover by Nuveen, ending over two centuries of independence for the asset manager.
The shock acquisition is set to create one of the world’s largest active asset managers, with nearly £1.8 trillion in assets under management across institutional and wealth channels.
The announcement also confirmed Schroders will retain its brand and that London will serve as the group’s non-US headquarters, with shareholders receiving 612p per share.
However, the announcement was vague on a significant detail, what the takeover would mean for its high net worth wealth management business, Cazenove Capital.
The future of Schroders’ star
Both Schroders and Nuveen provided little insight onto how Cazenove would slot into the combined business, despite the wealth-management business long being deemed a star asset.
Schroders acquired Cazenove for £424m in 2013, securing the asset to bolster its UK wealth management and private banking capabilities.
It also granted the firm access to Cazenove’s high net worth client base, adding substantial assets under management, roughly £17.2bn at the time.
Despite Nuveen chief executive officer, William Huffman, previously discussing opportunities in wealth management, he did not broach the subject in Nuveen’s separate statement.
The lack of attention on Cazenove has led some industry figures to speculate the firm could look to offload the business.
Jonathan Moyes, head of investment research at Wealth Club, said: “Cazenove is a well respected wealth management brand, but as part of Schroders, it tends to get overlooked and perhaps does not always get the limelight it might feel it deserves.
“Running a UK wealth management business is clearly not aligned with the core strategy of Schroders, nor TIAA. Both appear intent on achieving immense scale across both their public and private market asset management businesses.”
Moyes noted that in contrast to the Evelyn Partners deal, where multiple bidders were in the running to buy the manager before Natwest snapped up the firm for £2.7bn, Cazenove hasn’t attracted the same interest.
Moyes said: “We suspect the prospect of offloading Cazenove to another firm that can give it its full attention may prove too tempting.”
Using the brand’s success
However, others argued if utilised correctly Cazenove could be a success for Nuveen.
Rae Maile, research analyst at Panmure Liberum, said: “Cazenove Capital has been a jewel in the crown for Schroders and can be for Nuveen too if respected, managed and backed.
“The UK has few enough structural growth opportunities but wealth management is certainly one and Cazenove Capital has a fantastic brand, backed by financial strength and the capabilities of the larger Schroders group both in terms of research but also product range and product structuring.
“It is rare among wealth managers…having these capabilities in-house.”
Cazenove serves the “properly wealthy” with a minimum investment of £1m and is extending its position in the family office market, granting it a wider consumer base than other wealth management firms.
Maile also noted that Nuveen’s intention to retain the Schroders brand, should also mean keeping the Cazenove brand, due to the American firm also being a wealth manager.
He also urged the firm to “learn the lesson” of JP Morgan, who spent a considerable sum on the Cazenove brand in investment banking and “then has largely ditched it”.
Growing wealth management
Schroders and Nuveen had no further comment beyond the initial announcement of the decision.
However, the announcement from Schroders cited that both Nuveen and Bidco, a new subsidiary of the US firm, plan to “strategically maximise each brand”, with Nuveen intending to maintain Schroders’ existing investment and client teams.
It also noted that both brands share a focus on “driving future growth through the wealth channel”, and the acquisition supports the “development of a more globally diversified” wealth management proposition.
Nuveen will provide Schroders access to US wealth and institutional distribution, while Schroders grants the US access to wealth clients in the EMEA and Asia-Pacific regions.
Wealth management suitors
The acquisition also raised the question of the future of the industry. It was announced in the same week a number of wealth managers saw their share prices drop after the unveiling of a new AI tool designed to help people manage their wealth.
But despite the UK wealth management industry appears to be “in rude health” as it faces significant pressure from AI, intense regulatory scrutiny and high operational costs, assets under management are growing steadily and a number of firms are looking to swoop in as companies hunt for new owners.
Moyes said: “The outlook feels positive with lots of innovation coming that should help to support margins and improve the ways in which these firms serve their clients. It should be an exciting decade for the wealth management industry.”