BNY Mellon Focused on Asset Management Business With Recent Acquisitions

The Bank of New York Mellon Co. (NYSE: BK) is a financial holding company, providing investment servicing (like asset servicing, issuer services, clearing services) and investment management services to institutional investors, which includes mutual funds, collective investment funds and other investment pools, corporate and public retirement plans, insurance companies, foundations, endowments and investment managers, around the world. BNY Mellon primarily competes with State Street (NYSE:STT), JP Morgan Chase (NYSE:JPM) and Citigroup (NYSE:C).

BNY Mellon is one of the leading asset managers in the world with $1,115 billion in assets under management at the end of 2009. We estimate that the asset & wealth management business contributes 24% to our $36.22 Trefis price estimate for Bank of New York’s stock.

Bank of New York Invests in its Asset & Wealth Management Business

The investment management business in general is witnessing strong growth as economic conditions improve as well as demand from emerging economies surge backed by strong markets and increasing wealth. ^{[1] [2]}

Seeing the trend, BNY Mellon recently has made new acquisitions or investments in a couple of asset management firms. On Sept. 1, 2010, BNY Mellon acquired I(3) Advisors of Toronto, an independent wealth advisory company with more than C$3.8 billion in assets under advisement at acquisition. This was BNY Mellon’s first wealth management acquisition in Canada, and is another step in the international expansion of its wealth management business.

More recently, BNY Mellon Asset Management has acquired a 20% minority interest in Siguler Guff & Co., and certain related entities. Siguler Guff is a multi-strategy private equity firm with over $8 billion in assets under management. Siguler Guff’s focused investment offerings include fund-of-funds targeting distressed security investing, emerging markets including Brazil, Russia, India and China (BRIC), distressed real estate and small cap buyout opportunities. ^[3]

The acquisition of Insight Investment Management, the third largest manager of United Kingdom Pension funds, in 2009 helped drive a 13% increase in BNY Mellon’s assets under management earlier this year. We believe the recent acquisitions could help BNY Mellon further grow its assets under management going forward. ^[4]

As BNY Mellon expands its asset management business, it is being increasingly recognized among the top investment managers globally. Recently Standish Mellon Asset Management Company LLC, the fixed income specialist for BNY Mellon Asset Management, was named Best Eurozone Fixed Income Manager this week in Asia Investor magazine’s 2010 Investment Performance Awards for institutional funds management. ^[5]

BNY Mellon’s Asset Management Business

We currently forecast BNY Mellon’s assets under management (AUM) to grow from $1.4 trillion in 2009 to $1.7 trillion in 2013 at an annual rate of 10.2% annually based on our expectations of improvement of macroeconomic outlook, heightened focus on client servicing, growth in personal wealth and rising inflow of funds from emerging markets.

However, if BNY Mellon’s AUM grows at a 15% compounded annual growth rate, there could be just under 10% upside to our $36.22 Trefis price estimate for BNY Mellon.

Our complete analysis of BNY Mellon’s stock is here.

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1. Asia’s asset management sector grows at double-digit clip, Asia News Network [↩]
2. Investment Management Profitability Grew Strongly in Q4 2010, Hedgeweek [↩]
3. Siguler Guff Announces Investment by BNY Mellon Asset Management, Siguler Guff [↩]
4. BNY Mellon Profit Rises on Asset Management Fees, Business Week [↩]
5. BNY Mellon Asset Management Continues To Be Recognised For Performance, PR Newswire [↩]