Guggenheim weighs sale of $250B asset management unit
Guggenheim Partners is exploring the sale of a stake in its $250 billion asset-management unit overseen by Scott Minerd, according to people familiar with the matter.
Guggenheim Partners Investment Management has been in talks with global insurers, sovereign wealth funds and investment pools in Europe, the Middle East and Asia, the people said. The Wall Street Journal reported Wednesday that the deal could involve Guggenheim taking on German insurer Munich Re’s asset management unit.
Discussions are in early stages and it’s possible that no deal is reached, the people said. The firm’s largest investors have been in talks about the strategic options, the people said.
“Guggenheim listens to people who propose acquisitions of stakes from time to time,” Mike Sitrick, an outside spokesman for Guggenheim, said in an email. He declined to comment further. A spokesman for Munich Re declined to comment.
Minerd, 59, is seeking to strengthen his division, which mostly oversees money from insurers, by diversifying the investment base, which is more than 90% from U.S. investors. More than half of Guggenheim’s assets under management were from insurance companies, including several Guggenheim affiliates and Sammons Enterprises, its biggest shareholder, Minerd said at a June 6 insurance industry conference in New York.
“Insurers do not generally like to give up control over their investments,” said Michael Haid, analyst at Commerzbank.
While insurance firms and asset managers have long histories of cross ownership, they also face conflicts, such as differing investing strategies, Minerd said this month at the conference. The best outcomes occur when insurers — or other investors — buy minority stakes in asset managers, he said.
A deal with Munich Re’s asset management business “could make sense, you may have some cost savings,” said Michael Haid, an analyst at Commerzbank. “On the other hand, insurers do not generally like to give up control over their investments. It’s part of the value chain and so any transaction would have to be structured in a sensible way” to avoid conflicts of interest as Guggenheim manages other insurers’ assets.
Munich Re shares fell 1% at 10:48 a.m. in Frankfurt trading. The stock is down 1.1% this year.
Recent insurance and asset-manager tie-ups include Nippon Life Insurance’s acquisition of a 25% stake in TCW Group for about $490 million and MetLife’s acquisition of Logan Circle Partners from Fortress Investment Group, both last year. In 2014, TIAA purchased Nuveen Investments for about $6 billion.
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In April, Guggenheim completed the sale to Invesco of 77 ETFs for $1.2 billion. That transaction was led by Jerry Miller, who was hired last year as president of Guggenheim Investments from Deutsche Bank.
Minerd, a frequent guest on Bloomberg TV and CNBC, is one of Wall Street’s most visible bond-fund managers. A member of the Federal Reserve Bank of New York investor advisory committee on financial markets, Minerd is known for his bold predictions on markets, economics and central bank policies. He joined Guggenheim, which is run by CEO Mark Walter, in 1998 after high-flying stints at Merrill Lynch, Morgan Stanley and Credit Suisse First Boston.
Minerd’s funds have consistently outperformed peers even as Guggenheim underwent management conflicts and high-level departures. The $9.7 billion Guggenheim Total Return Bond Fund (GIB) has returned an average 4.3% over the last five years, outperforming 96% of its Bloomberg peers.
Guggenheim is about 45% owned by employees. It has several insurance affiliates and an investment-banking division headed by Wall Street veteran Alan Schwartz, the last CEO of Bear Stearns. A strategic investment would require agreement from the company’s stakeholders such as Sammons Enterprises, which controls about 35% of the firm; co-founder Todd Boehly, who left in 2015 to run Eldridge Industries; and Peter Lawson-Johnston II, a Guggenheim family descendant.