Family Office & RIA Weekly Roundup | 10.24.24 | Volume 126

Volume 126

10/24/2024 (5 Min. Read)

Private Equity Battles, ETFs Make Global Headlines, and the U.S. Comes Out on Top in this Week's Edition...

Take a Lap Around the Industry

• Gold Hits Record High as Rate Cuts and Middle East Tensions Fuel Demand?(Financial Times)
• AI Startup Perplexity in Funding Talks to More Than Double Valuation to $8 Billion?(WSJ)
• Australian ETF Assets Soar by 50% in a Year?(Financial Times)
• Yen Resumes Decline on Doubts over Japan Interest Rate Rises?(Financial Times)

KKR and Bain Square Off in $4B Battle for Fuji Soft

KKR and Bain Capital are locked in a high-stakes battle for control of Fuji Soft, a $4 billion Japanese software company, marking an unprecedented contest in Japan's M&A market. Fuji Soft's board has backed KKR's ￥8,800 per share bid but has not rejected Bain’s more recent offer, which is 7% higher. The involvement of high-profile shareholders, including 3D Investment Partners and Farallon Capital Management, has fueled the competitive bidding. Bain, hailed as a "white knight" by Fuji Soft’s founder, has offered ￥9,450 per share, pushing the company's stock price above both offers and sparking speculation about an escalating bidding war. However, KKR currently controls 32.7% of Fuji Soft’s shares, giving it a strong position in the deal. Analysts are watching closely to see if the battle intensifies, with some casting doubt on further bids due to KKR’s influential stake.

"The Japanese market is ready for this kind of fight between PE firms, but nobody is going to risk their reputation going hostile."

Private Funding Pulse Check

• Fintech firm,?Obligo , specializing in security deposit solutions for real estate rentals, has secured $35M in new funding, with support from Jacobson's family office, Highsage Ventures
• Provence Capital has participated in a $53M Series C funding round for?Agrolend , a digital bank based in S?o Paulo, Brazil focused on the agribusiness sector
• Oriole Networks , a company dedicated to advancing AI system performance and optimizing data centers, has secured $22M in Series A funding, with backing from Dorilton Capital Family Office
• With support from Stanley Druckenmiller's family office, Duquesne Family Office, LLC,?Tako , an AI search engine specializing in visualizing and sharing global knowledge, has raised $5.75M in Seed funding

Source: FINTRX Data

M&A Activity Tracker?

• Waverly Advisors has acquired Cincinnati-based 9258 Wealth Management, which oversees more than $1 billion in client assets, marking Waverly’s seventh RIA acquisition of the year
• 9258, founded by Walt Lunsford in 2017, offers investment advisory and tax planning services to? high-net-worth individuals, corporate retirement plans, and charities and will join Waverly as a partner and regional director
• The acquisition expands Waverly's AUM to $14.4 billion and adds new service lines, while integrating 9258’s 24 employees across its three Ohio offices into Waverly’s growing team
• Waverly Advisors, supported by Wealth Partners Capital Group and private equity firm, HGGC, has completed 17 transactions since 2021, growing its national presence to 25 offices and over 200 employees (Citywire)

U.S. Economic Growth Surges as Investment Outpaces Global Peers

The U.S. is outpacing other advanced economies in terms of growth, fueled by rising investment and productivity. According to the latest International Monetary Fund report, U.S. GDP is projected to grow 2.5% by the fourth quarter of this year, the fastest among G7 nations, compared to a global growth forecast of 3.3%. Higher investment in nonresidential sectors and rising real wages are key factors driving this growth. In contrast, other advanced economies, particularly in Europe, continue to struggle, with Germany’s investment spending expected to decline. The U.S. has also benefited from abundant domestic energy supplies, insulating it from the price shocks that have burdened European firms. This surge in investment, coupled with energy independence, has enhanced U.S. productivity, positioning the country for long-term economic leadership. The divergence in investment trends between the U.S. and other economies marks a notable shift in global economic power.

"An increase in investment is having a very direct effect in terms of performance of equity markets. But it has a bigger impact in terms of the shape of the global economy.”

Neil Shearing (Capital Economics)

Source: WSJ

Active ETFs Gain Ground in Europe as Janus Henderson Joins the Race

Janus Henderson is making its debut in the European actively managed ETF market with the launch of the Janus Henderson Tabula Japan High Conviction Equity Ucits ETF (JCPN). This follows the fund house’s acquisition of Tabula Investment Management five months ago, as it expands its ETF franchise beyond the U.S.. JCPN will focus on a concentrated portfolio of Japanese equities, with 20-30 stocks, capitalizing on investor demand for a simpler and more transparent investment approach. While active funds remain a small fraction of Europe’s ETF landscape, they are gaining momentum, representing 8.4% of net inflows in Q3 2024. Janus Henderson’s push into this space reflects a growing trend among asset managers who are launching active ETFs to capture a share of the growing market. The company’s experience managing funds in the U.S. and its strong performance in Japanese equities position it well for success in Europe’s evolving ETF market.

“We see ETFs as the more efficient way to get access [to markets].”

Michael John Lytle (Tabula)

Private Equity Buyout Fund Fees Hit Record Low as Managers Vie for Investors

Management fees for private equity buyout funds have dropped to their lowest levels since 2005, as fund managers navigate a challenging fundraising environment. The average fee for buyout funds closing this year or still fundraising in June fell to 1.74% of investors' committed capital, down from a previous low of 1.85% in 2023. Several factors, including limited exit opportunities through IPOs and dealmaking, higher interest rates, and economic uncertainty, have hampered private equity firms' ability to return capital to investors. This has left limited partners with less cash to reinvest, pressuring buyout firms to offer concessions on fees. Larger fund managers, benefiting from economies of scale, have reduced fees across multiple strategies, while smaller firms struggle to stay competitive. Despite lower management fees, performance fees, or carried interest, have remained steady, with average figures hovering around 19.5% of fund profits.

"Cash returned by private equity managers to their investors, known as limited partners, has been way, way off what LPs had grown accustomed to planning around and that had been a challenge."

Greg Durst (Institutional Limited Partners Association)