LaSalle Investment Management is buying Aviva Investor’s Real Estate Multi-Manager arm, a move that the two firms, which employ opposing fund management strategies, have taken to deal with the current market.
Aviva has created a £37bn platform focused on assets that it can manage directly.
LaSalle, by taking on the $7bn (£5.3bn) of assets under management in the REMM business, will become one of the top five largest non-listed indirect real estate investment managers, with $10bn of AUM globally.
LaSalle’s global chief executive officer Jeff Jacobson says its strong multi-manager capacity has become increasingly important to its clients.
“The preference we have is to scale up our direct business and to focus there,” says Aviva’s Daniel McHugh, who will be managing director for real estate investments.
“It made sense for LaSalle because it was combining two businesses and it will scale that, and it made sense for us because we are reconfiguring a real asset capability across real estate and alternative solutions to create scale in that space.”
Aviva
Aviva Investors Real Assets will have real estate, infrastructure, structured finance and private debt under a single £37bn structure. Some £17bn of that will be real estate; of that, £13bn is in the UK and £4bn is in France.
David Skinner, managing director, real estate strategy and fund management, says it is looking “to invest significantly in the real estate platform over the coming years with a view to consolidating our position in the UK and launching new products there, but also building and enhancing the European platform we have.”
Mark Versey will be chief investment officer, and Barry Fowler will be managing director for alternative income.
The deal shows a focus on being able to directly invest in, manage and control assets in an increasingly expensive but still attractive real estate market.
“Control of the value creation of the investment management chain is key to delivering the returns and outcomes that our clients need,” says Skinner.
“[The deal] made sense for LaSalle because it was combining two businesses and it will scale that, and it made sense for us because we are reconfiguring a real asset capability across real estate and alternative solutions to create scale in that space.”
The intention now is to expand the offer, but in markets where Aviva is demonstrably expert, Skinner says, adding that the market is at a mature stage in the cycle, and Aviva will take a cautious approach.
McHugh says: “What we are going to do is look at what clients are looking for, what sort of themes and what pressures clients are under in terms of how they allocate capital, in terms of geography but also across the risk spectrum.
“We will bring forward a number of products in that space looking to respond to that demand, but that space will be aimed at a third-party global client base.”
LaSalle
LaSalle is taking the opposite route: scaling up its fund management business to ensure that it remains in the top tier of managers.
“The acquisition of Aviva’s REMM business gives us the scale and global reach to support our current indirect business,” says Simon Marrison, chief executive officer for Europe. “This kind of expansion can be done much faster than organic growth, and makes us the fifth-largest indirect investment managers globally.”
Ed Casal will be joining LaSalle, from his current role as chief executive officer of real estate at Aviva, to head the division.
As part of the deal, LaSalle also took full control of the Encore+ fund, the €1.7bn (£1.5bn) joint venture managed with Aviva. The open-ended Continental European real estate fund has been running for 11 years, and was recognised as the best-performing fund in the IPD PEPFI for 2017 and on an aggregate five-year basis.
“It is also important to note that acquiring a multi-manager business gives us access to co-investment and jv mandates, which aligns with our current business,” says Marrison, who did not rule out further acquisitions to continue to expand.
The firm is following in the wake of a number of other fund manager consolidations and buy outs over the past year [see below] that are intended to boost scale to ensure profitability in terms of regulation and to secure larger but fewer mandates.
LaSalle did not confirm whether it would be launching more funds.
LaSalle is committed to its core open-ended fund structure, particularly Encore+, which is our flagship open-ended fund. However, we remain committed to our separate account business, especially in the UK, where this is a large part of our activity,” says Marrison.
Fund management M&A activity 2017-18
■ August 2017 – Aberdeen Investment Management and Standard Life complete merger to create Aberdeen Standard Investments
■ October 2017 – Patrizia buys Copenhagen-based real estate fund of funds Sparinvest Property Investors
■ November 2017 – Patrizia buys Triuva, which manages 40 funds in Europe
■ December 2017 – US fund manager Principal Global Investors buys Internos Global Investors
■ December 2017 – Patrizia buys Rockspring Property Investment Managers
■ February 2018 – Brockton Capital shifts business from fund manager to real estate company with £340m of equity from Tel Aviv-listed Alony Hetz Properties and Investments
■ February 2018 – Macquarie Infrastructure and Real Assets buys Munich-based GLL Real Estate Partners
■ February 2018 – European Asset manager Candriam Investors Group buys 40% stake in Tristan Capital Partners
■ May 2018 – Aviva IM sells REMM business to LaSalle Investment Management
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