Spain’s Allfunds Group is buying Credit Suisse’s business-to-business investment fund platform InvestLab for an undisclosed sum as the investment services industry consolidates to reap the benefits of scale.
Credit Suisse will take a stake of up to 18 per cent in the combined business, the two companies said on Tuesday. It will also receive an undisclosed cash payment.
The Swiss bank said the transaction would result in a 0.5 per cent increase in return on tangible equity (RoTE) this year, which Zuercher Kantonalbank analysts said suggested the sale price “had to be relatively high”.
Even so, the analysts said the deal to combine what essentially are digital fund supermarkets would have little impact on the operating business at Credit Suisse.
“This transaction is really a sideshow” for Credit Suisse, Zuercher Kantonalbank’s Javier Lodeiro said, adding the gross margin for the combined Allfunds-Investlab business from assets under custody was probably “extremely thin”.
Allfunds calls itself the world’s largest institutional fund distribution network and said the combination with Credit Suisse InvestLab would offer 78,000 investment products to financial institutions across more than 45 countries, with assets under management topping 500 billion euros ($570 billion).
Credit Suisse is exiting control amid consolidation in a technology-driven business area where scale has grown more important, creating opportunities for Allfunds to bulk up.
Singapore’s sovereign wealth fund GIC and private equity investor Hellman & Friedman bought Allfunds in 2017 from Intesa Sanpaolo Group, Santander Group, General Atlantic and Warburg Pincus.
“Going forward, Credit Suisse will utilize the combined business platform to distribute mutual funds and ETFs (exchange traded funds),” the Swiss bank said in a statement.
InvestLab has about two dozen employees, who will retain their jobs with the transaction, a spokesman said.
“The combination will allow Allfunds to accelerate and expand its investment into the development of new services and solutions to the benefit of the funds eco-system, comprising of asset managers, fund distributors and other intermediaries,” Allfunds said.
“With this arrangement, Allfunds continues its global expansion into new territories while consolidating business ambitions in Asia and Central Europe,” Allfunds added, saying Switzerland would become a key business hub following the deal, which is due to close in early 2020.
InvestLab offers distributors access to over 46,000 products from more than 170 providers worldwide, with assets under management topping 140 billion Swiss francs ($144 billion).