As BNY Mellon’s first official slide presentation from Monday indicates, the combined firm is now one of a handful of asset managers with over $1 trillion of AUM.
This slide (slide #12) also contains a few hints about the rationale behind the merger (at least from an asset management perspective).
Firstly, it shows that BNY bought their way into this exclusive group. Check out the AUM of the individual firms: around $150 billion from BNY and $850 billion from Mellon.
And second, the slide trumpets the combined firm’s management of alternative investments (“over $50 billion in alternative assets”). (Bank of New York already owned $15b AUM hedge fund-of-funds manager Ivy Asset Management).
But in retrospect, it seems that BNY’s hunger for more AUM – and for more alternatives in particular – might have been telegraphed in a report published only 2 months ago by the bank and consulting firm Casey, Quirk & Associates (and covered here by AllAboutAlpha.com). A few passages from that report were somewhat prophetic:
“Today’s hedge fund techniques will be tomorrow’s mainstream investing. Alternative investing has impacted institutions’ fundamental investing philosophyâ€”institutions’ interest in and appreciation for less constrained, absolute return-oriented investments is gradually extending to other parts of their portfolios.”
“‘Institutional quality’ competitors will dominate. This will include many traditional firms managing hedge funds, strong multi-product hedge fund firms, and fund-of-hedge fund firms with improved advisory skills that will emerge as trusted advisors. Operational excellence and comprehensive risk oversight are among the key drivers of hedge funds.”
The report went on to predict that institutional demand for hedge funds would grow to around $1trillion by 2010.
So how could any company with only $150 billion in AUM (overall) publish a report showing such growth in alternatives without wanting to go out and buy a ticket to play in this game?
The research report said that like us at AllAboutAlpha.com, BNY sees the world through an alpha/beta lens:
“As the movement toward separation of alpha and beta continues, institutional investors will primarily seek investment managers that can deliver alpha and are oriented around an absolute return.”
To see the firm underscore its focus on alpha/beta (hedge/ETF) bifurcation, simply check out the BNY homepage today (December 4th). Note the first 2 “thought leadership” items in the right-hand column: studies on hedge funds and ETFs…
We’ll be keeping a close eye on BNYM’s emerging alpha-centric investing strategy – and re-reading that research report to glean more clues about BNY Mellon’s next moves.