With its 1.7 billion euro acquisition of Dutch asset manager NN Investment Partners completed as of today, US investment powerhouse Goldman Sachs Asset Management takes a major strategic step towards further growth. NN IP’s full management board will continue to lead, expand its services, and will become a center of excellence for sustainability in public markets investing.
Fadi Abuali, CEO of Goldman Sachs Asset Management International, and Satish Bapat, CEO of NN IP, spoke to Investment Officer in an exclusive interview. The current board of NN IP will also remain responsible for NN Investment Partners B.V., the management company which houses all investment funds and strategies registered in the European Union, including Luxembourg.
For Goldman, the acquisition will boost its assets under management to approximately 2,800 billion dollars, affirming its position as world’s fifth-largest asset management company. Goldman’s assets under supervision in Europe now rise to over 600 billion dollars.
The acquired company for now will continue to operate under the NN IP brand. In due course, the brand name NN IP will be changed to that of the asset management arm of Goldman Sachs, known as GSAM. The management expects that this will happen sooner than the maximum term of two years agreed with its parent, Dutch insurance group NN Group.
Town hall Tuesday
The complete management board of NN IP, and Fadi Abuali (pictured) and Dermot McDonogh, CEO of Goldman Sachs International Bank, will together form the NN IP Leadership team. This team will guide the integration of NN IP into Goldman Sachs Asset Management and prioritise specific market opportunities. On Tuesday, the 900 employees of NN IP in The Hague will be updated on the integration at a town hall meeting.
Abuali and Bapat told Investment Officer that there will be no changes in the investment teams and the services provided to clients at this time. For the majority of NN IP’s portfolio management teams, nothing will change for the time being. In the short term, Goldman Sachs will make its research in fixed income available to the investment teams of NN IP. “Our clients will also benefit from this,” said Abuali.
Growing to matrix structure
In the near future, it is intended that the management team investment members, known as the MTI, of NN IP will work in a matrix structure in which they will be accountable to both chief investment officer Valentijn van Nieuwenhuizen of NN IP and the investment management team of Goldman Sachs AM.
Speaking to Investment Officer, Fadi Abuali says he was delighted when he learned on 26 April 2021 that NN Group was going to do “a strategic review” of NN IP and that sale was one of the options. “We had of course been looking around for some time for opportunities to grow organically or through acquisitions in Europe,” he said.
Last August, parties announced that Goldman Sachs AM would buy the asset management arm of NN Group for 1.7 billion euro. By doing so, the house shook off other contenders, such as the German DWS. The icing on the cake of this takeover was that GSAM (and part of NN IP) agreed with the seller NN Group that the asset manager would be the ‘preferred supplier’ for NN Group’s general account for a period of ten years. As a result of that deal, GSAM becomes the global market leader in the provision of services and (investment) solutions for insurers.
Netherlands “most developed fiduciary market”
GSAM International announced its new strategy at an Investor Day in 2020. Objectives included growth in Europe and, as one of the largest global asset managers in alternative strategies, growth of 150 billion dollar in assets under management in this segment by 2025. Abuali also sees good opportunities for this in the Netherlands, which he calls “the most sophisticated fiduciary market in Europe”. NN IP brings in more than 40 mandates and around 50 billion euros in fiduciary assets in that area.
“Customers are at the centre of everything for us. They are looking for stability, excellent service and high returns. We are confident that our team can deliver that. The most important thing is that we grow and provide solutions for our clients. We think we can add our strength to that of NN IP. NN IP, for its part, will fill the vacuum that we have in Europe, such as in European equities, green bonds and sustainable and impact investing, and we, for our part, will fill the vacuum that they have, such as in private equity, infrastructure and private debt, so that together we can offer clients in the Netherlands strong risk-adjusted returns,” said Abuali.
He also points to NN IP’s strong market position in Europe. For GSAM, this will serve as a basis for further growth. Abuali did not want to share any figures about the targets for market share and assets under management. But in the interview, he talks about doubling the assets under management in Europe “over the cycle”. GSAM International’s takeover of NN IP will bring its assets under management on the continent to more than 600 billion dollars. Worldwide, the American house has 2,800 billion dollars in assets under management.
The Hague seen as ESG centre of excellence
In the run-up to today’s deal, there has been much talk in the Dutch asset management community about the integration of the two organisations, the alleged cultural differences and the reservations shown by some pension funds and other clients of NN IP.
Asked how GSAM will shape the integration to bring in the “best of both worlds”, Abuali said Goldman and NN IP in recent months have become “the new best friends”.
“NN has a 175-year history. We at Goldman have a 153-year history. You don’t build that without a strong focus and willingness to collaborate, partnership, integrity and excellence in what you do,” said Abuali.
Complementarity
Bapat agrees. “Sometimes it is good to have some differences of opinion. That is crucial for a strong organisation. I see differences as a good contribution to a combination. That is complementarity, especially if you respect each other.”
With regard to the specific fiduciary market in the Netherlands, Abuali said that “pension funds rely heavily on the specific Dutch foundation”.
“We are very excited to further develop the legacy of NN IP in this area. We reaffirm our commitment to fiduciary management. We commend ourselves for having a strong market position with NN IP and for being able to grow, also in the rest of Europe. The Hague will become our ‘centre of excellence for sustainable investing globally’ and it will be our largest hub in Europe for asset management.”
Goldman Sachs AM said that NN IP has now made almost 90 per cent of its funds and products ESG-proof. The US house said it will integrate this knowledge and expertise into its own investment processes and product range.
Deeper and wider
Abuali explains that GSAM is a large fiduciary manager, for example in the United States, but also in England. “As part of the further growth in this segment, NextCapital Group was recently acquired in the US. The selection of external managers is also in GSAM’s DNA,” said Abuali.
In this context, he said, the asset manager can also give pension funds access to third parties. Alternative investments, in which GSAM itself is good and big, are also part of this from the point of view of “strong diversified adjusted returns”.
When confronted with the fact that Dutch pension funds, for the sake of their participants, are strongly focused on low fees and costs, Abuali said: “Because we have scale, we can be competitive in this market and keep costs relatively low.”
“The message to our customers is that we will work together as one organisation, we will provide the breadth and depth of products and solutions that they expect from us and we will also provide opportunities for our employees to grow,” said NN IP’s CEO Satish Bapat.
“This is a pleasant and consistent message to our organisation, also internally. And our customers, with whom we are in constant dialogue, have reacted quite positively to the combination. Because what we can offer now, we couldn’t do individually until now.”
This article originally appeared on InvestmentOfficer.nl.
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