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Sam Subramanian edits AlphaProfit’s investment newsletter and investing blog. The newsletter frequently rises to the top of the Hulbert Financial Digest’s performance rankings and features among MartketWatch’s top 10 investment newsletters. Sam researches a wide range of securities... More
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  • Financial Services Firms Exiting Asset Management  0 comments
    Oct 9, 2009 2:01 PM | about stocks: ACS, PER, BSBR, VRSK, BCS, BAC, C, LNC, MS
    As confidence in the economy and financial markets improves, the tempo of corporate transactions is picking up. Recently, information technology consulting firms Affiliated Computer Services (ACS) and Perot Systems (PER) received buyout offers for $6.7 billion and $3.9 billion respectively.
     
    The pace of initial public offerings is increasing as well. Companies have raised more than $11 billion through IPOs since the turn of the month. Spanish bank Grupo Santander (ES: SAN) sold a 16% stake in Banco Santander Brasil (BSBR) to raise a whopping $8 billion. Actuarial data provider Verisk Analytics (VRSK) raised $1.9 billion through an IPO.
     
    Large financial services firms are taking advantage of robust capital markets and busily shedding their asset management businesses.
     
    Barclays (BCS) kicked off this trend selling Barclays Global Investors to BlackRock for $13.5 billion in June.
     
    In the third quarter, Bank of America (BAC) sold most of Columbia Management for $1 billion. Citigroup (C) sold its interest in Nikko Asset Management and Lincoln National (LNC) sold Delaware Investments.
     
    In Europe, the old Julius Baer (JBHGY.PK) separated its asset management business to form GAM Holdings.
     
    Additional transactions are in the pipeline with Morgan Stanley (MS) reportedly looking to jettison Van Kampen Fund.
     
    So, are diversified financial institutions right in selling asset management businesses?
     
    A rising stock market coupled with surging capital market activity is often good for asset management businesses. While certain diversified financial firms have been compelled to sell such businesses due to losses in other lines, others have cited the need to focus on strengths.
     
    Only time will tell if the timing of such sales is truly opportune. If stock prices continue to rise and volatility continues to fall, sellers may well regret their decision to get rid of asset management businesses.

    Disclosure: I do not hold long or short positions in any of the securities discussed.
     
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