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Invesco in Talks to Buy OppenheimerFunds: A Right Move?
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Per the sources familiar with the matter, Invesco (IVZ - Free Report) is in talks to buy OppenheimerFunds, a subsidiary of Massachusetts Mutual Life Insurance, for approximately $5 billion. The deal, if finalized, is expected to be announced later this week or in October.
With nearly $250 billion in assets under management (AUM), OppenheimerFunds is an actively-managed mutual fund group and has a small exchange-traded fund (ETF) business as well. It was acquired by Massachusetts Mutual in 1990 for nearly $150 million, and has offices in New York, Dallas, Seattle, Denver and Rochester.
Over the last few years, OppenheimerFunds has been trying to expand its presence in the municipal bond market and ETF business with an aim to diversify and boost fees. But mounting competitive pressure from passive trading strategies as well as rising regulatory and technology costs, and decline in fees seem to be making OppenheimerFunds less profitable for Massachusetts Mutual, which put the unit on the block for sale last month.
Invesco is facing these concerns too. Thus, the company has been pursuing inorganic growth strategyto ramp up its operations. Last year, it acquired Guggenheim Investments' ETF business and European ETF group Source.
Earlier this year, Invesco CEO Martin Flanagan said, “…if there’s something that comes along that we think will materially improve the competitive positioning of the firm, we would clearly pay attention to it.”
As of Aug 30, 2018, Invesco had preliminary month-end AUM of $988 billion. If the company agrees to buy OppenheimerFunds, its AUM is anticipated to cross $1.2 trillion. This will lead the company to join the upper levels of asset management industry among the leaders that include Fidelity, BlackRock (BLK - Free Report) , Vanguard and Capital Group.
Industry is expected to face further pricing pressure in the coming days. Fidelity’s recent introduction of a no cost index fund is expected to further intensify price war and curb fee revenue growth.
Therefore, if the agreement to buy OppenheimerFunds is finalized, it will likely to be a step in the right direction for Invesco. This may even prop-up the company’s shares to some extent, which has been declining since the beginning of the year. Shares of Invesco have plunged 33.5% so far this year compared with 7.8% fall for the industry it belongs to.
Currently, Invesco carries a Zacks Rank #3 (Hold).
Cohen & Steers’ Zacks Consensus Estimate for the current year has moved marginally upward over the past 60 days. Its shares have gained 8% in the past 12 months.
SEI Investments has witnessed a marginal upward earnings estimate revision for the current year, over the past 60 days. Its share price has increased 3.4% in the past year.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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Invesco in Talks to Buy OppenheimerFunds: A Right Move?
Per the sources familiar with the matter, Invesco (IVZ - Free Report) is in talks to buy OppenheimerFunds, a subsidiary of Massachusetts Mutual Life Insurance, for approximately $5 billion. The deal, if finalized, is expected to be announced later this week or in October.
With nearly $250 billion in assets under management (AUM), OppenheimerFunds is an actively-managed mutual fund group and has a small exchange-traded fund (ETF) business as well. It was acquired by Massachusetts Mutual in 1990 for nearly $150 million, and has offices in New York, Dallas, Seattle, Denver and Rochester.
Over the last few years, OppenheimerFunds has been trying to expand its presence in the municipal bond market and ETF business with an aim to diversify and boost fees. But mounting competitive pressure from passive trading strategies as well as rising regulatory and technology costs, and decline in fees seem to be making OppenheimerFunds less profitable for Massachusetts Mutual, which put the unit on the block for sale last month.
Invesco is facing these concerns too. Thus, the company has been pursuing inorganic growth strategyto ramp up its operations. Last year, it acquired Guggenheim Investments' ETF business and European ETF group Source.
Earlier this year, Invesco CEO Martin Flanagan said, “…if there’s something that comes along that we think will materially improve the competitive positioning of the firm, we would clearly pay attention to it.”
As of Aug 30, 2018, Invesco had preliminary month-end AUM of $988 billion. If the company agrees to buy OppenheimerFunds, its AUM is anticipated to cross $1.2 trillion. This will lead the company to join the upper levels of asset management industry among the leaders that include Fidelity, BlackRock (BLK - Free Report) , Vanguard and Capital Group.
Industry is expected to face further pricing pressure in the coming days. Fidelity’s recent introduction of a no cost index fund is expected to further intensify price war and curb fee revenue growth.
Therefore, if the agreement to buy OppenheimerFunds is finalized, it will likely to be a step in the right direction for Invesco. This may even prop-up the company’s shares to some extent, which has been declining since the beginning of the year. Shares of Invesco have plunged 33.5% so far this year compared with 7.8% fall for the industry it belongs to.
Currently, Invesco carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the same space are Cohen & Steers Inc (CNS - Free Report) and SEI Investments Company (SEIC - Free Report) . Both stocks carry Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cohen & Steers’ Zacks Consensus Estimate for the current year has moved marginally upward over the past 60 days. Its shares have gained 8% in the past 12 months.
SEI Investments has witnessed a marginal upward earnings estimate revision for the current year, over the past 60 days. Its share price has increased 3.4% in the past year.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>