Bank of New York Mellon Corporation announced Tuesday that it has agreed to acquire Insight Investment Management Limited from Lloyds Banking Group plc for £235 million.
Based in London, Insight manages a range of UK, Ireland and Cayman domiciled funds and predominantly serves pension schemes, insurance companies, corporates and local authorities in the UK.
Insight, the third largest manager of UK pension funds, will become part of BNY Mellon Asset Management, which follows a multi-boutique asset management model of different investment teams operating independently but using shared resources.
The acquisition will increase BNY Mellon’s assets under management to more than US$1 trillion.
BNY Mellon pointed to Insight’s liability driven investment (LDI), fixed income and alternative investment expertise as well as its large institutional client base as the main reasons for the acquisition.
Jon Little, vice chairman of BNY Mellon Asset Management, said: “Through its impressive record of innovation, investment skills and new approach to investment management, Insight Investment has been at the forefront of helping its clients resolve the challenges faced by defined benefit pension plans in the UK.’
‘In a very short time, it has built a market leading position in LDI to add to its already impressive reputation as a leading fixed income manager. We believe that together, BNY Mellon Asset Management and Insight Investment can take these award-winning investment capabilities and expand Insight Investment’s international reach,” Mr. Little said.
Liability driven investment is an alternative investment method now increasingly used by pension funds, as more and more pension schemes have faced deficits and funding gaps in recent years.
Traditional benchmark-driven investment strategies focus on a pension scheme’s assets rather than its liabilities in terms of the cash payments that have to be paid to pension plan members.
LDI, in contrast, aims to establish a link between assets and liabilities, by making the liabilities themselves the benchmark for a pension scheme’s performance and risk management.
In 2008 Insight Investment was the fastest growing institutional investment manager in the UK and able to increase assets under management, revenue and profitability in spite of difficult market conditions.
The sale of Insight comes as part of a strategic review of Lloyds’ asset management business. Lloyds concluded that the group’s investment management of funds sourced from different brands including Clerical Medical, Halifax and Bank of Scotland, will be brought together under its Scottish Widows Investment Partnership.
This decision also concerns Insight Investments’ internal funds.
The sale to BNY Mellon covers Insight’s external fund management operation and assets of approximately £80 billion, Lloyds said.
Under the deal, expected to complete in the final quarter of the year, BNY Mellon will pay £200 million pounds in cash and £35 million in equity.