CC Capital Partners became the latest buyout firm to target the sector with a A$2.9bil offer on Monday for Insignia Financial Ltd. — Bloomberg
SYDNEY: A 33-year-old piece of legislation in Australia is helping to spark fresh interest from private equity firms, including KKR & Co and Bain Capital, as they seek to tap into one of the world’s fastest-growing money management industries.
Since its inception in 1992, Australia’s compulsory pension system has amassed a A$4 trillion nest egg that’s poised to triple over the next two-and-a-half decades, according to a Mercer report.
Wealth and fund managers have been the beneficiary of the system. With mandated contributions now poised to rise to an all-time high, the equivalent of 12% of each worker’s salary, some of the biggest buyout firms are circling the space.
CC Capital Partners, set up by a former Blackstone Inc dealmaker, became the latest buyout firm to target the sector with a A$2.9bil offer on Monday for Insignia Financial Ltd.
That topped a bid from Bain Capital, setting up a potential bidding war with the Boston-based firm.
CC Capital’s move follows KKR’s A$2.2bil offer last year for part of Australian money manager Perpetual Ltd, while hedge fund Regal Partners Ltd made a pitch for another fund company Platinum Asset Management Ltd.
“The Australian market is unique globally given the structure of mandated employee contributions, which means by definition the industry has a natural tailwind, which should mean year-on-year growth,” said Manoj Jain, co-founder and co-chief investment officer of hedge fund Maso Capital.
Mercer forecasts a dozen mega-funds will control more than A$100bil each by 2028.
So-called industry super funds, born out of the union movement, manage the vast bulk of the savings. Private asset management firms with their shareholder-profit model also oversee a significant chunk. That growth has led to a surge in investment and mergers.
Announced deals targeting Australian financial services firms totalled more than US$64bil over the last five years, more than double the US$29bil in the previous five years.
CC Capital is the latest firm to enter the fray. The family office set up by Chinh Chu bid A$4.30 per share in cash for Insignia.
That exceeded the A$4 a share offer from Bain Capital, which Insignia rejected last month. A representative for Bain declined to comment on the rival offer.
CC Capital is an insurance and asset management firm that Chu, who left Blackstone in 2015, has begun to assemble in the mold of Apollo Global Management Inc.
The company has been examining deals in Australia since 2018 and was outbid when National Australia Bank sold its superannuation arm MLC Wealth to Insignia in 2020, according to a person familiar with the matter, who asked not to be identified as they weren’t authorised to speak publicly.
Insignia manages A$319bil across its sprawling portfolio. That includes billions in retirement savings across a range of funds, making it among Australia’s top 10 largest players.
It has a A$90bil asset management business and two financial advice units. Still, Insignia’s challenges underline those common in space.
The company had outflows of A$1bil for the three months to Sept 30, though its funds under management increased 2.7%. — Bloomberg
