Global Asset Management M&A Insight Winchester Capital 2016

I. BANNER YEAR FOR USA ASSET Chart I: US Asset Management Announced Acquisitions MANAGEMENT M&A TRANSACTIONS Volume and Value 2011-2015 2015 has been a banner year for asset management merger 160 30 and acquisition activity in the USA market. Total announced deal value in 2015 was a record $24.2 billion, an increase of $21.4 billion or 767% since 2011. The number of 150 22.5 announced transactions (149) is at its highest level in the last four years. This trend is expected to continue through 2016, 140 15 as current year-to-date announced transactions are forecasted to

produce similar results. 2015 was also a record year for completed USD Billions No. of Transactions No. transaction value ($21.8 billion). Based on year-to-date transactions, 130 7.5 the total volume and value of completed transactions has softened, however, there are nearly 50 transactions totaling $11.5 billion that 120 2011 2012 2013 2014 2015 0 are pending completion which could markedly impact these year- to-date figures. The US market trend of continued growth is also Number of Transactions Transaction Value reflected in the global market. Source: Standard & Poor’s

II. GLOBAL ASSET MANAGEMENT M&A MARKET Chart II: US Asset Management Completed Acquisitions Volume and Value 2011-2015 Over the past five years there have been over 3,000 -acqui sitions of asset management companies of varying size. 160 22 Of this amount, 10% have been made by publicly traded asset managers with market capitalizations greater than $1 billion. The asset management global M&A market has 120 16.5 been quite active from 2011-2015, with an average of 511 transactions completed each year. Strong market conditions remain in place and 80 11 should make for an active Q4 2016-2017. There continues to be

increased availability of low cost debt for acquisitions. Recently, the USD Billions No. of Transactions No. United States Federal Reserve, of England and 40 5.5 European Central Bank have all elected to keep interest rates at record low levels. Combined with the fact that acquiring firms 0 2011 2012 2013 2014 2015 0 continue to have strong balance sheets, there is a large amount of liquidity in the asset management M&A market. Number of Transactions Transaction Value Source: Standard & Poor’s www.winchestercapital.com 1 Global Asset Management M&A Insight Winchester Capital 2016

The global M&A Market has been active with a number of recent Chart III: Global Asset Management Completed Acquisitions high profile mergers and acquisitions. In September, MassMutual Volume and Value 2011-2015 completed a merger of four subsidiaries to create a $275 billion asset management company. Babson Capital Management (US), 580 70 Wood Creek Capital Management (US), Cornerstone Real Estate 560 60 Advisers (US), and Baring Asset Management (UK) were combined under the iconic brand of Barings. Additionally, the private 540 50 equity firm Warburg Pincus is in talks to acquire a 49% joint 520 40 venture with China’s Baosteel Group from Societe Generale, to tap 500 into the growing mutual fund industry in China. 30 480 USD Billions No. of Transactions No. Since 2015, the largest concentration of asset management 460 20 acquisitions representing $37.7 billion in value is in Europe and North America. Overall nearly 74% of all transactions in 440 10 2015-2016 have occurred in these key regions, which have seen 420 0 an increase in their proportion of transactions since 2014, 2011 2012 2013 2014 2015 compared to a slightly declining percentage in Asia. In 2016, Number of Transactions Transaction Value the value of completed transactions in North America is approximately $6 billion, with nearly $12 billion in transaction Source: Standard & Poor’s value pending completion. This suggests that there is potential for a robust asset management M&A market in Q4 2016 through 2017.

Table I: Total Transaction Value for Global Asset Management M&A Market 2011-2016 ($m)

Region 2011 2012 2013 2014 2015 2016 Announced Pending Totals Completion Europe 14.9 9.9 15.8 10.7 5.2 4.2 5.6 66.2 Africa / Middle East 1.2 0.3 0.4 0.0 0.6 0.2 0.8 3.7 United States and Canada 5.5 4.7 3.1 41.2 22.4 5.9 11.5 94.2 Asia / Pacific 4.5 4.7 5.0 6.6 3.0 3.8 5.6 33.3 Latin America and Caribbean 1.9 2.1 8.7 0.2 2.6 1.2 3.0 19.6 Totals 28.1 21.7 33.0 58.6 33.7 15.3 26.5 $216.9 Source: Standard & Poor’s

Table II: Total Number of Transactions for Global Asset Management M&A Market 2011-2016

Region 2011 2012 2013 2014 2015 2016 Announced Pending Totals Completion Europe 191 188 168 176 186 116 59 1,084 Africa / Middle East 23 19 19 16 14 12 7 110 United States and Canada 230 186 193 174 177 107 82 1,149 Asia / Pacific 100 101 99 89 92 56 60 597 Latin America and Caribbean 15 21 40 16 26 18 9 145 Totals 559 515 519 471 495 309 217 3,085 Source: Standard & Poor’s www.winchestercapital.com 2 Global Asset Management M&A Insight Winchester Capital 2016

The median completed global EBITDA multiple for 2011-2016 global Chart IV: Global Asset Management Acquisitions asset management M&A transactions is 10.7x. Overall, median transaction Transaction Multiples 2011-2016 multiples have been trending down from 2011-2015, reaching a low value 14 of 7.7x. The 2016 year-to-date median EBITDA multiple has increased to 9.4x, an increase of 23% from the prior year’s multiple, however this value is 10.5 still below the full sample median value, suggesting there is still value in asset management transactions. The decreasing trend of transaction multiples 7 and the availability of lower cost debt create ideal market conditions for acquiring firms interested in increasing global AUM. Multiple (x) Multiple 3.5 III. ASSET MANAGEMENT ACQUIRERS BY RANK 0 Full Several companies have taken advantage of the strong market conditions 2011 2012 2013 2014 2015 2016 Sample Median EBITDA Multiple over the past five years to increase assets under management through global acquisitions. In Europe, Swiss firm Julius Baer Group Ltd has acquired 9 Source: Standard & Poor’s companies with total deal value of $1.3 billion. Of the top 15 acquirers of asset management companies, 6 of the companies were located in the United States, with The Carlyle Group LP acquiring 9 firms for $1.2 billion in total transaction value. Overall, the top 15 global asset man- agement acquirers have completed 63 transactions Table III: Top Acquirers of Asset Management Companies 2011-2016 for over $18 billion in total consideration over the Buyer Ticker Location Transactions Transaction past five years. Value Julius Baer Group Ltd. SWX:BAER Switzerland 9 1,336 IV. MAJOR DEALS ANNOUNCED The Carlyle Group LP NasdaqGS:CG United States 9 1,200 2015-2016 Aberdeen Asset Management PLC LSE:ADN United Kingdom 7 1,455 Fifteen transactions have been announced with Legg Mason, Inc. NYSE:LM United States 4 1,351 a total transaction value greater than $1.0 HarbourVest Partners, LLC United States 4 3,452 billion for 2015-2016. These 15 transactions Principal Financial Group Inc. NYSE:PFG United States 3 1,709 represent a total of more than $44 billion in TA Associates Management, L.P. United States 3 1,150 consideration. Of these deals, 9 are pending Redefine Properties Limited JSE:RDF South Africa 3 1,101 completion, for a total transaction value of over Canadian Imperial Bank of Commerce TSX:CM Canada 3 1,058 $20 billion. This suggests that the lower trend Henderson Group plc LSE:HGG United Kingdom 3 984 in 1H 2016 could be reversed in 2H 2016, as Piramal Enterprises Limited BSE:500302 India 3 804 deals are approved by regulatory authorities. L.P. NYSE:BX United States 3 765 The largest announced and completed transaction IOOF Holdings Limited ASX:IFL Australia 3 654 since 2015 is CPPIB Credit Investments Inc. $12 Schroders plc LSE:SDR United Kingdom 3 631 billion acquisition of Antares Capital, followed Global Asset Management, S.A. Spain 3 625 by Prologis, Inc. and Norges Bank Investment Management’s acquisition of KTR Capital Partners, Totals 63 $18,275 LLC for $5.9 billion. Source: Standard & Poor’s Limited to Global acquirers with at least $500m in total acquisitions.

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Table IV: Largest Announced Global Asset Management Transactions from 2015-2016 Announcement M&A Target Buyers Total Transaction Date Closed Date Value ($m)

Jun-15 Aug-15 Antares Capital CPPIB Credit Investments Inc. 12,000

Apr-15 May-15 KTR Capital Partners, LLC Prologis, Inc.; 5,900 Norges Bank Investment Management

May-16 - American Capital, Ltd. Ares Capital Corporation 4,261

Nov-15 - CETIP S.A. - Mercados Organizados BM&FBOVESPA S.A. 2,905

Jul-16 - GE Capital Interbanca S.p.A. Banca IFIS SpA 2,833

Aug-16 - CIFC LLC F.A.B. Partners I LP 2,296

May-16 - Mirae Asset Securities Co., Ltd. Mirae Asset Co., Ltd. 2,205

Dec-15 Apr-16 Daewoo Securities Co., Ltd. And Mirae Asset Securities Co., Ltd. 2,062 KDB Asset Management Co.

Aug-15 Oct-15 Gem Alliance Limited Wincon Investment Company Limited 1,954

Dec-15 - Galaxy Internet Holdings Co., Ltd. Sinoer Men’s Wear Co., Ltd. 1,696

Sep-16 - American Realty Capital - American Realty Capital Advisors LLC; 1,448 Retail Centers of America, Inc. American Finance Trust, Inc.

Jul-15 May-16 Shanghai Pingpu Investment Co., Ltd. Ping An Life Insurance 1,359 Company of China, Ltd.

Feb-16 - BSI SA EFG International AG 1,329

Oct-15 Jun-16 Frank Russell Company TA Associates Management, L.P.; 1,150 Reverence Capital Partners LLC

Dec-15 May-16 American Century Nomura Holdings, Inc. 1,000 Investment Management Inc.

Total $44,398

Source: Standard & Poor’s

V. CONCLUSIONS Continued Momentum in the M&A Market We expect continuing M&A momentum in the asset management M&A market through Q4 2016 and 2017. As companies look to expand into new geographic regions and sectors, strategic acquisitions will continue to provide a fast and efficient means to grow AUM. We expect to see an increase in both strategic acquisitions and private equity acquisitions of asset management companies as PE firms utilize record amounts of dry powder (committed and uninvested capital).

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Fixed Income Increasing With emerging markets such as China, India, and several African Fixed income mutual funds have seen positive net inflows of funds nations all producing economic growth greater than 6.5% in the consistently over the past several months. Investors continue to second quarter of 2016, there is potential for continued strong per- look for less risky investments in current volatile market condi- formance. tions. The greatest impact on performance of fixed income funds is potential interest rate increases. If the global central con- ETF and Index Funds Increased Focus tinue to keep interest rates at record lows or moderately increase Investment in ETF and index funds increase as investors focus on interest rates, the impact on fixed income AUM should be muted. more stable returns and lower fees. There are now nearly 2,000 ex- change traded funds listed on the US stock exchanges, with nearly Emerging Markets Reversing Trend 160 launched in 2016 alone. Many larger active fund managers will As investors seek higher yields than traditional high yield bond look to acquire ETF and index fund issuers. In May 2016, Columbia funds provide, emerging market funds could see an increase in Threadneedle Investments announced the acquisition of Emerging asset inflows. Emerging market funds have consistently - outper Global Advisors, and Hartford Funds acquired Lattice Strategies. formed developed economies year-to-date, and companies such as BlackRock have recently invested heavily in the emerging markets.

METHODOLOGY This research examines both announced and completed global M&A activity in the asset management sector. Transactions are reported on both announcement and completion date as noted in each chart/table. Minority transactions of less than 20% are excluded, unless the transaction size is greater than $500m. Transaction data is sourced from Standard & Poor’s.

ABOUT THE AUTHOR DR. DAVID BOWEN Winchester Capital is pleased to announce the addition of David Bowen, Ph.D. to our team of transatlantic professionals. A native of Massachusetts, David is a cum laude graduate of Bryant University and achieved his Masters of Business Studies in Corporate Finance and Accounting from University College, Cork, (Ireland) where he also received his Doctorate in Finance. Dr. Bowen is a published author in The Journal of Trading and also The European Journal of Finance. Dr. Bowen’s previous career experience included positions at Brown Brothers Harriman & Co. and Bridgewater Associates.

ABOUT WINCHESTER CAPITAL Since 1986, Winchester Capital has focused on our four pillars: Integrity, Heritage, Insight and Perseverance. We offer professional advisory services and asset management with a record of transactions in 40 countries. In 2015, we received the Distinguished Award for Boutique Firm of the Year. We excel in direct transaction research, initiation and execution. If you are considering an acquisition or disposal transaction or you desire further research, please contact our Director of Corporate Communications, Ms. Pippa Smith at [email protected]. For further information on this research please visit winchestercapital.com or contact our Director of Global Research, Dr. David Bowen at [email protected].

This research is not offered as advice or guidance for investment purposes. This research contained herein has been compiled from publicly available sources at the time of publication and may be subject to change without notice. © COPYRIGHT Winchester Capital 2016. ALL RIGHTS RESERVED. 5

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