Auckland-headquartered fund administration firm MMC has emerged as the surprise winner in the battle for the ASB-owned investment platform Aegis.
The bank confirmed the Aegis sale last Thursday for an undisclosed price, although industry sources suggest ASB was originally seeking up to $80 million for the aging platform.
Law firm MinterEllisonRuddWatts, which advised on the deal, said the purchase was funded via a “unique ‘stretch senior ‘ financing from an offshore credit fund”. Such ‘stretch’ loans bundle senior and subordinated debt into a single package from one lender, giving borrowers more flexible terms and access to higher leverage than a traditional asset-backed loan.
Neil Millar, MinterEllisonRuddWatts partner, said in a release a large legal team worked alongside MMC and its private equity half-owner, Pencarrow, on the “important acquisition”.
“We helped MMC work through the complexity of extracting the Aegis business from ASB focusing on ensuring that Aegis employees, clients and suppliers are transitioned with minimal impact on them and the business,” Millar said.
The deal should be finalised by December, according to the MinterEllisonRuddWatts release.
ASB trotted Aegis out once more for sale in May after abandoning an earlier attempt to offload the once market-leading platform in 2010.
It is understood the latest offer attracted four or five bids including a handful of Australian contenders that subsequently backed off.
Formally, MMC has purchased the ASB investment administration and custody businesses, Aegis and ICSL.
The deal marks out new territory for MMC, which has carved out a strong position as a fund back-office specialist since launching in NZ in 2004. With Aegis, however, the fund administrator intersects directly with financial advisers and investors for the first time.
MMC shares a number of clients in common with Aegis including Westpac, Milford Asset Management and Select Wealth.
In a statement, MMC said the firm “identified private wealth administration as a natural adjacent opportunity and saw the chance to enter this sector of the market at scale by purchasing Aegis”.
“This purchase marks a significant milestone for MMC who are looking to build onto their outsourced fund and registry administration capabilities.”
MMC chief, Tom Reiher, said the platform buy represented a “good opportunity to extend our offering with the benefit of bringing on existing Aegis clients, staff and resources to provide scale and a diverse client base in private wealth”.
“Aegis is a good business which requires continued investment and strategic management focus to ensure its customers continue to receive excellent levels of service into the future,” Reiher said.
“We’re excited to confirm our acquisition of Aegis. The transaction marks a significant milestone for us as we’ve been looking to grow through diversifying our service offerings into adjacent areas, and the acquisition of Aegis gives us the opportunity to expand further into private wealth. We’re committed to investing for the long term and look forward to having the Aegis team join us and working with the wide-range of existing Aegis clients to ensure their long-term success. We have nothing more to add at this time.”
Adam Boyd, ASB head of wealth, said in a statement: “Aegis is a good business which requires continued investment and strategic management focus to ensure its customers continue to receive excellent levels of service in the future. As part of this review, we came to understand that Aegis would be best placed to grow and serve the interests of its customers under a new owner with a specialised focus.
“Essential to the success of Aegis is its people, and that has been a key consideration with MMC committed to investing for long-term success, and committing to offer employment to all Aegis employees.”
In May Aegis reported funds under administration (FUA) of about $15.2 billion but has since added another $800 million or so, according to the platform’s website.
“From receipt of its first funds in May 1998, Aegis has grown to administer $16bn on behalf of more than 19,000 investors, and is the investment administration service of choice for more than 90 groups of investment professionals throughout New Zealand,” the website says.
While Aegis was the first investment platform to gain scale in NZ it has lost ground in recent years to rival, FNZ, which now leads the pack by FUA. The arrival of the NZX-owned Wealth Technologies (via its purchase of Apteryx in 2015) to the scene has also added spice to the platform market.
Another consortium of Australian and NZ firms also plans to roll out another investment platform next year.
Wealth Technologies has about $2 billion in FUA, mostly courtesy of Craigs Investment Partners, but is on track to transition a major Aegis client – the approximately $3 billion Hobson Wealth Partners – next year.
It is understood other Aegis clients were poised to jump off the platform, which has suffered from years of underinvestment from the Commonwealth Bank of Australia (CBA)-owned bank, pending the ownership change.
MMC will likely upgrade the sagging Aegis technology within the next few months.
Established in 2004 just prior to the establishment of the PIE regime and KiwiSaver, MMC has grown to almost $60 billion in funds under administration across 28 clients. In total, MMC performs back-office duties for over 260 funds while supplying registry services on behalf of 160,000 plus investors.
Wellington-headquartered private equity firm, Pencarrow, took an almost 50 per cent stake in MMC last in 2016 via a newly-established vehicle, the Pencarrow Bridge Fund.