Is there a better investment for an investment firm than investing in another investment firm?
The answer is “No” if you go by T Rowe Price’s decision yesterday to acquire credit management firm Oak Hill Advisors — the latest example of the continuing consolidation of the asset-management industry.
One To Grow On
Private capital strategies — private credit, private equity, and infrastructure coupled together — grew to $7.4 trillion by the end of 2020, and Morgan Stanley expects the space to reach $13 trillion by 2026. To keep up with the demand, T Rowe is acquiring the private credit specialist in the most expensive deal in the storied firm’s history.
With $1.6 trillion in assets under its belt, T Rowe already ranked near the top of the industry’s active managers, and the expensive acquisition of Oak Hill significantly increases its piece of the pie:
- Oak Hill will add $53 billion in assets to T Rowe’s portfolio, spread across private, liquid, distressed, special situations, structured credit, and real asset strategies, according to the Financial Times.
- T Rowe will fork over $3.3 billion at closing, roughly 74% cash and 26% T Rowe stock. If targets are met, it will pay an additional $900 million in cash.
COVID Proof: So far in 2021, there have been 160 asset management deals worth $25.3 billion across the globe. But that’s nothing compared to last year when there were 208 deals worth $54 billion. That’s at least one feather in 2020’s cap.