Thursday 21, June 2018 by Bloomberg

Guggenheim said to weigh stake sale for $250 billion manager

 

The firm’s largest investors have been in talks about the strategic options

Guggenheim Partners is exploring the sale of a stake in its $250 billion asset-management unit overseen by Scott Minerd, according to people familiar with the matter.

Guggenheim Partners Investment Management has been in talks with global insurers, sovereign wealth funds and investment pools in Europe, the Middle East and Asia, the people said. The Wall Street Journal reported Wednesday that the deal could involve Guggenheim taking on German insurer Munich Re’s asset management unit.

Discussions are in early stages and it’s possible that no deal is reached, the people said. The firm’s largest investors have been in talks about the strategic options, the people said.

“Guggenheim listens to people who propose acquisitions of stakes from time to time,” Mike Sitrick, an outside spokesman for Guggenheim, said in an email. He declined to comment further. A spokeswoman for Munich Re declined to comment to the Journal.

Minerd, 59, is seeking to strengthen his division, which mostly oversees money from insurers, by diversifying the investment base, which is more than 90 per cent from U.S. investors.

More than half of Guggenheim’s assets under management were from insurance companies, including several Guggenheim affiliates and Sammons Enterprises Inc., its biggest shareholder, Minerd said at a 6 June insurance industry conference in New York.

While insurance firms and asset managers have long histories of cross ownership, they also face conflicts, such as differing investing strategies, Minerd said this month at the conference. The best outcomes occur when insurers—or other investors—buy minority stakes in asset managers, he said.

Recent insurance and asset-manager tie-ups include Nippon Life Insurance Co.’s acquisition of a 25 per cent stake in TCW Group Inc. for about $490 million and MetLife Inc.’s acquisition of Logan Circle Partners from Fortress Investment Group LLC, both last year. In 2014, TIAA purchased Nuveen Investments for about $6 billion.

In April, Guggenheim completed the sale to Invesco Ltd. of 77 exchange traded funds for $1.2 billion. That transaction was led by Jerry Miller, who was hired last year as president of Guggenheim Investments from Deutsche Bank AG.

Minerd, a frequent guest on Bloomberg TV and CNBC, is one of Wall Street’s most visible bond-fund managers. A member of the Federal Reserve Bank of New York investor advisory committee on financial markets, Minerd is known for his bold predictions on markets, economics and central bank policies. He joined Guggenheim, which is run by Chief Executive Officer Mark Walter, in 1998 after high-flying stints at Merrill Lynch, Morgan Stanley and Credit Suisse First Boston.

Minerd’s funds have consistently outperformed peers even as Guggenheim underwent management conflicts and high-level departures. The $9.7 billion Guggenheim Total Return Bond Fund has returned an average 4.3 per cent over the last five years, outperforming 96 per cent of its Bloomberg peers.

Guggenheim is about 45 per cent owned by employees. It has several insurance affiliates and an investment-banking division headed by Wall Street veteran Alan Schwartz, the last CEO of Bear Stearns & Co. A strategic investment would require agreement from the company’s stakeholders such as Sammons Enterprises Inc., which controls about 35 per cent of the firm; co-founder Todd Boehly, who left in 2015 to run Eldridge Industries; and Peter Lawson-Johnston II, a Guggenheim family descendant.

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