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Yarra Capital acquires Nikko AM’s Australian operation

Dion-Hershan

This week Yarra Capital announced the acquisition of Nikko Asset Management’s Australian business, named Nikko AM, in a deal that will see the combined group hit A$20 billion in assets under management. The combined multi-asset manager will become one of the largest independently owned fixed income and equities managers in the country.

This transaction, set to close in April 2021 pending regulatory approvals, marks an acceleration in Yarra’s growth strategy, coming four years since its spin-out from Goldman Sachs Asset Management. The group will move from the current $8 billion under management, a significant amount with major institutions and pension funds, to $20 billion.  The equities teams will remain seperate under the deal. 

As part of the transaction, Nikko AM will take a 20% ownership stake in Yarra Capital Management and rebrand its investment unit to Tyndall, a name synonymous with “value” investing in Australia. The Tyndall name was removed after the sale to Japanese asset manager Nikko in 2014.  While limited to the Australian investment operations, the deal is expected to offer Yarra Capital access to Japan’s massive pension market, in the top three in the world by size, and its growing appetite for Australian fixed income and real asset investments. According to the Australian Financial Review, Yarra will be able to distribute Nikko products in Australia and Nikko, Yarra products in Japan. Interestingly, Nikko also distributes the uber-popular ARK fund, run by Cathie Wood, in Australia.

Nikko’s head of Australian equities Brad Potter will bring ten managers with him into the new Tyndall brand, while Hershan will remain head of Yarra’s own equities team. Both equities teams will remain seperate, with only fixed income to be integrated. Commenting on the announcement, Potter says “the transaction will enable us to continue strengthening our partnerships with clients and will provide the additional scale to support greater investment in talent, technology and operational excellence,”

Ultimately, “Yarra was attracted to the quality of the people within Nikko AM’s Australian business”. The news comes shortly after Nikko AM’s managing director, Sam Hallinan, joined Schroders as CEO of its Australian operations.

The deal stands out as one of the first large consolidations within the fragmented Australian funds management industry that is facing significant pressure from low-cost active managers and searching for efficiencies. With pension funds far more progressed on the consolidation trail, there are likely more deals ahead in 2021.

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