Dive Brief:
- State Street is in talks to merge its asset-management business with that of UBS, The Wall Street Journal reported Friday, citing anonymous sources. Bloomberg reported earlier in the day the Boston-based bank was looking to gain scale by combining its asset-management arm with UBS's or Invesco's.
- State Street and UBS had considered combining their asset-management arms in 2012, according to Reuters, but discussions fell through. The banks have revisited the option since early 2020 and appeared close to a deal over the summer, the Journal's sources said, without giving a reason for why a tie-up wasn't struck then.
- Several other banks, including Wells Fargo, Bank of Montreal and Societe Generale, have weighed putting their own asset-management units on the market as larger players aim to grow to compete with the likes of that segment's leader, BlackRock.
Dive Insight:
Terms of a deal between State Street and UBS this year were close enough to complete that the banks had hashed out roles for some of the combined entity's top executives and were floating brand names for the tie-up, The Wall Street Journal reported.
Before re-engaging with State Street, UBS had sought to combine its asset-management unit with that of Deutsche Bank until talks stalled last year, Bloomberg reported.
State Street Global Advisors manages roughly $3.1 trillion in assets and pioneered the selling of exchange-traded funds (ETF). However, over the past decade, its share of the U.S. ETF market has shrunk from 25% to 16%, according to Bloomberg data. Vanguard surpassed State Street in 2015 to become the nation's second-largest ETF issuer.
Morgan Stanley bolstered its position among asset managers in October, agreeing to buy investment management firm Eaton Vance in a $7 billion deal.
That tie-up left JPMorgan Chase outside the top five in the asset-management market, spurring that bank's CEO, Jamie Dimon, last week to publicly troll for deals in the space.
"Asset management, my line is open," Dimon said during a virtual conference when asked which segment of the bank's business would be best served by an acquisition. "If you've got brilliant ideas, give me a call."
The digitization of finance has forced a number of traditional investment companies to offer their services for close to nothing, and pushed money managers and brokers to drastically cut expenses. That has caused several of the market's smaller players to consider selling. Wells Fargo's asset-management arm, for example, could fetch $3 billion, Bloomberg reported in October, citing anonymous sources.
Capital rules governing large banks like State Street, however, limit how much the Boston-based bank could spend on acquiring a competitor.
State Street Global Advisors made headlines in January, when CEO Cyrus Taraporevala said it would "take appropriate voting action" against board members at big U.S., U.K., French, German, Japanese and Australian companies that lag on environmental, social and governance (ESG) standards if they "cannot articulate how they plan to improve" a score the bank calls the "R-factor," for responsibility.
The initial focus, Taraporevala said, would be on a small group of companies that are performing particularly poorly, but would expand in 2022 to companies that have consistently underperformed, compared with their peers.
Representatives for State Street, UBS and Invesco declined Bloomberg's requests for comment.
