Yesterday, Goldman Sachs Asset Management (GSAM), a wing of The Goldman Sachs Group Inc. (GS), announced its plan to purchase Vermont-based Dwight Asset Management Company from Old Mutual Asset Management (OMAM). OMAM is a part of London-based savings group, Old Mutual.
The terms of the deal were not yet disclosed. The deal is expected to close in the second quarter of 2012.
Dwight is a stable value investment firm having $42 billion of assets under management as of December 31, 2011. The firm specializes in providing fixed income investment management services including retirement plans, public funds, corporations and other institutions to institutional clients. Dwight intends to provide secure and steady returns to investors as in money market funds.
Among various savings investment options available, “stable value” has been renowned as the most acceptable investment plan among millions of people who are on the edge of retiring.
Among Goldman’s business segments, Investment Management includes management and other fees related to the company’s asset management businesses including Goldman Sachs Asset Management, Private Wealth Management and the company’s merchant banking funds. This segment contributed approximately 1/5th of the total revenue earned by the company in 2011.
The completion of the acquisition would help Goldman in gaining significant market share in the defined contribution investment-only business. Moreover, the bank would be able to prosper defined contribution business and provide more investment plans to facilitate retired people in capitalizing their hard earned retirement savings.
On the other hand, the completion of the deal will provide capital to OMAM. Therefore, the amount will be redeployed by the firm into global distribution and asset management franchise, which would help in building multi-boutique investment business over the long term. OMAM manages and grows a varied portfolio of asset managers serving various institutional and individual investors.
Like other big Wall Street banks such as Bank of America Corporation (BAC) and JPMorgan Chase & Company (JPM), Goldman has been buckled under the weakness in the wider economy and the fundamental pressures on the banking sector. Last month, the bank reported 67% fall in 2011 earnings compared to the prior year, and has targeted approximately $1.4 billion in run rate compensation and non-compensation expense reductions through a combination of declines in total staff and planned expenditures.
This deal gives Goldman full opportunity to leverage its strong corporate trust market reputation with Dwight’s experience and proficiency in inventive stable value solutions, which would offer enhanced investment options to its clients.
Goldman currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
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