IRELAND/US - State Street, the world's second-biggest money manager for institutions, is in talks to purchase Bank of Ireland's asset-management business, according to three people familiar with the matter.
No agreement has been reached for the unit, which controlled €25bn ($31.8bn) of assets as of April 16, and a sale may take months, said two of the people.
Scott Powers, chief executive officer of the Boston-based company's money-management unit, State Street Global Advisors, said in an interview published August 3 that the indexing specialist is looking for acquisitions to expand actively managed investments and cut reliance on passive funds.
BIAM is primarily an active manager, while State Street is the second- biggest US provider of index funds after BlackRock Inc.
"For a company like State Street that wants to get more integrated in the active asset-management business, a smaller manager could be the foundation for building a much larger product over a five-to-10-year period," Gerard Cassidy, an analyst with RBC Capital Markets, said in a telephone interview.
The European Commission ordered the sale of the unit as a condition of approving a government bailout of Bank of Ireland. BIAM assets have fallen from €57.5bn in 2004, when it was Ireland's largest investment manager.
Macquarie Group, the Sydney-based firm that had been negotiating to take over the Dublin-based unit known as BIAM, dropped out, according to two of the people, who asked not to be named because the negotiations are private. Bank of Ireland fell 0.5% to 76 cents as 8:20 a.m. in Dublin trading, giving the company a market value of €3.9bn.
Less than 5% of the $1.78trn that State Street Global Advisors handles for clients is held in traditional, actively managed stock and bond investments.
Active investing, which can bring in higher fees, relies on fund managers to select securities based on their own research or mathematical models.
Passive investing seeks to track the returns of broad markets or industries by following an index.
Carolyn Cichon, a State Street spokeswoman, declined to comment, as did Dan Loughrey, a Bank of Ireland spokesman, and Karen Smith, a London-based spokeswoman for Macquarie.
Invesco in June completed its acquisition of New York- based Morgan Stanley's retail funds business. Invesco, based in Atlanta, paid $1.37bn and added $123.1bn in mostly active assets.
At a price-to-assets ratio of that deal, BIAM would be worth about $354m.
Bank of Ireland's operating profit from asset-management services fell 15% in the first half from a year earlier to €17m. Asset-management fees declined 12% to €46m.
State Street employs about 2,000 in Ireland, according to the company's website. In March it opened a facility in Dublin that will eventually house 1,100 employees, working mostly in asset servicing.
A deal would mark the firm's first asset-management acquisition since it bought the passive equity business of Gartmore Investment Management in 2001. The company made two European acquisitions in the past year in the asset-custody business.
It purchased Mourant International Finance Administration in the U.K.'s Channel Islands in April and the securities- servicing unit of Italy's Intesa Sanpaolo SpA in May.
State Street is the second-biggest institutional money manager behind BlackRock. It is the third-largest custody bank, safeguarding $14trn in assets as of June 30, trailing Bank of New York Mellon Corp. and JPMorgan Chase & Co. in New York.
The Pensions and Lifetime Savings Association (PLSA) is in the process of convening an industry-wide group to take forward the work of the Institutional Disclosure Working Group (IDWG).
The Transfers and Re-registration Industry Group (TRIG) has given its support to an initiative which aims to complete occupational pension transfers within three weeks.
Scottish Widows has completed a bulk annuity deal for the Hitachi UK Limited Pension Scheme.