Adapt or die: Traditional asset managers urged to embrace alternatives

Asset managers not currently in private markets will find themselves forced to acquire or partner to survive in 2025, according to this global consultancy.

Bain & Company’s M&A in Financial Services: Coming Back to Life report underscored how the success of asset managers with private market offerings is redefining the global asset management field.

The paper discovered alternative asset managers that invest in the capital of privately owned companies, rather than publicly traded companies, saw their market cap rise by more than four times over the past five years.

In comparison, players without a private markets focus, such as traditional asset managers focusing on public markets or the wealth management arms of universal banks, experienced a market cap growth of just 1.6 times during the five-year period.

“The big private market shift has resulted in a double-barreled boost in M&A. For one thing, public market asset managers and universal banks are aggressively acquiring or partnering to move into private markets,” Bain & Company explained.

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This was evident in 2024 as asset management firms sought out M&A deals that moved them into the territory of alternative asset managers.

For example, the report highlighted BlackRock’s announcement late last year that it would acquire global credit investment manager HPS Investment Partners for US$12 billion.

Within Australia, similar examples are evident with Regal Partners’ acquisition of private capital and alternative investment specialist Merricks Capital, and GQG Partners purchasing stakes in Avante Capital Partners, Proterra Investment Partners and Cordillera Investment Partners from Pacific Current Group.

Looking ahead to this year, Bain & Company expects M&A activity in the alternatives space to only ramp up further, as asset managers expand with new offerings to meet investor demand.

“We believe that the momentum will continue – and possibly accelerate – in 2025, especially as wealth and asset managers not currently in private markets find themselves forced to acquire or partner to survive.

“The most successful traditional asset managers and wealth managers will look for deals that provide them with products that generate alpha for clients, while alternative asset managers will primarily aim to build scale. As the market converges and becomes even more competitive, companies that pursue neither route will find themselves a target for competitors that do.”

Hamilton Lane recently uncovered that Australian advised clients are the most eager among global peers to invest in private markets, with their knowledge of the asset class also being higher.

Some 61 per cent of Australian clients were described as “very interested” in private markets. The US followed at 53 per cent for eager clients, Canada at 42 per cent, and Europe at 33 per cent.

Across the globe, Hamilton Lane also found that a key reason why advisers are offering private market investments is to have a competitive edge when attracting and retaining clients. Some 70 per cent of global respondents said they provide these investments to strengthen their relationships with current clients, and 58 per cent said to attract new clients.