EnvestnetPMC has put out an undisclosed bid to acquire Net Asset Management, another Web-based, turnkey provider of separately managed accounts, mutual funds and alternative investments to broker/dealers and independent registered investment advisers. The deal would create the largest independent platform for fee-based advisers in a segment that began consolidating about 18 months ago but has much further to go, an analyst said.
"The way this business is going, it is going to be difficult to solely provide managed accounts or solely provide mutual fund wrap programs," said Judson Bergman, EnvestnetPMC's chief executive officer. "Both firms will work together to create a unified platform."
The post-merger company, to be called Envestnet Asset Management and have $11 billion of assets under management, would offer investment products like managed accounts, mutual funds, multi-manager accounts, and other fee-based brokerage products, EnvestnetPMC said.
Bergman, who is to be the president and co-chairman of the new company, said he began talks with Net Asset Management in Los Angeles three months ago when he found out it offered fee-based brokerage services that EnvestnetPMC did not.
The deal, which is expected to close in mid-May, would create a company servicing 45,000 investment accounts with $11 billion of assets under management - $6.5 billion in managed accounts and mutual funds and $4.5 billion in fee-based brokerage products. The firm currently services about 400 advisers.
Chip Roame, an analyst at Tiburon Strategic Advisors, said that in view of the consolidation that is going on among turnkey asset management programs, size and depth are crucial. The current 57 turnkey asset management programs saturate the marketplace and should only number 20 to 25, he said.
"When a market is oversaturated, consolidation is a natural outcome," he said. "The winners will be the firms that sign up institutional relationships with banks, brokerage firms and CPA firms as opposed to firms that try to go after one adviser at a time."
Roame said he expects more consolidation this year and in the next five years. The trend began in August 2002 when the Bank of New York bought Lockwood Advisers. Last year, PFPC, a unit of PNC Financial Services Group Inc., bought Advisorport.
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