BrazilMercer acquires Japanese asset management company BFC
Global consulting firm Mercer has acquired Tokyo-based asset management company BFC, in a move that extends the firm’s reach in Asia’s investment management market.
Alongside its consulting and human resources arm, Mercer, which is a subsidiary of US-listed Marsh McLennan Companies, is a global provider of investment solutions. With over $200 billion in assets under delegated management, Mercer Investment Solutions is the largest institutional multi-manager and investment adviser as well as the largest discretionary delegated solutions provider in the world.
In a bid to expand its reach into Asia, Mercer has purchased Japan’s BFC for an undisclosed sum, in a move that marks a rare instance of inbound investment into the country’s financial sector. According to data from Dealogic, an analyst company for the M&A sector, foreign companies have in the past three years made just three such acquisitions in Japan. The largest deal in recent times was the acquisition of financial services group Orix by Capital Group Companies in 2013, for a reported deal the size of $1.07 billion.
Established in 2006, BFC specialises in investment solutions for Japanese pension plan sponsors, with a strong focus on alternative investments. “For more than 10 years we have worked hard to deliver the highest client service, and the joining of forces will enable us to continue to deliver on this commitment,” said Noriyuki Kawana, Chairman and Chief Executive Officer of BFC. “We will be able to further support our clients based on Mercer's world class investment manager research across all asset classes and strong delegated implementation capabilities. Mercer’s powerful resources will further empower our ability to deliver quality client solutions across Japan – which remains our highest priority.”
The consolidation comes at a time when the global investment environment has become ever more challenging with ultra-low bond yields, high equity valuations, and greater financial market complexity. As a result, investors are demanding investment mangers raise their game, seeking among others better governance and more clear-cut solutions. In Japan, there is a clear trend that institutional investors are diversifying away from government bonds into, among other areas, foreign markets and alternative investment funds.
It is in particular BFC’s alternative investment track record that caught the eye of Mercer, as Tatsuya Kamoi, CEO Japan and Far East Zone for Mercer, explained; “BFC is a truly client-centric firm and one of Japan’s successful providers of alternative investment solutions focusing on hedge fund and private equity strategies. They are an ideal complement to Mercer’s strength and success in the provision of strategic investment advice in Japan.”
The deal also significantly strengthen Mercer’s non-alternative investments business, including long-short funds, private equity and debt, real estate, infrastructure, hedge funds, and commodities.
Top five player
Expansion in both investment areas will accelerate Mercer’s growth strategy in Japan. Mercer Investment Solutions launched in the country in 2015, and although the outfit has made good progress, Japan is known for its relatively competitive multimanager marketplace. Mercer's newcomer status proved a hurdle in attracting business from corporate and public pension fund clients, admitted Kamoi. The tie-up will – depending on the model – make Mercer a top five player, he added.
Commenting on the integration, both Kawana and Kamoi said that they expect the operational blending and transition of employees to be smooth, as the two parties know one another relatively well. Before the deal, BFC was a client of Mercer’s for several years, said Rich Nuzum, President of Mercer’s global wealth business. He added, “This is a marriage after dating for many years. You can view this deal as a vertical integration play.”
Across Asia meanwhile, Mercer Investment Solutions recently obtained delegated investment licenses from Hong Kong and Singapore, while the firm is currently applying for licenses in China and South Korea.
