Affiliated Managers Group‘s (AMG – Free Report) jumped 7%, following the announcement of the acquisition of a controlling stake in Parnassus Investments, one of the largest managers of sustainable investment funds in the United States. Financial terms of the deal, which will be funded from “existing company resources”, are not yet disclosed.
San Francisco-based Parnassus combines fundamental and environmental, social and governance (ESG) research to deliver strong risk-adjusted returns for clients. With more than 35 years of experience in responsible investing, the company manages nearly $ 47 billion in assets.
Jay C. Horgen, President and CEO of Affiliated Managers, said: “We are very pleased to have the opportunity to partner with Parnassus, as we have immense respect for his decades-long work in the field. sustainable investment and high quality business built by an exceptional management team.
Additionally, Benjamin E. Allen, CEO of Parnassus, said: “Since our founding, we have been committed to remaining independent and investing on the basis of both principle and performance. AMG’s unique partnership approach preserves our company’s entrepreneurial and investment-centric culture, which is essential to our customers and our team; the cultural alignment between Parnassus and AMG, with the respective long-term partnership orientations of our companies and a strong shared belief in sustainable investing, made our decision clear.
Offer details and benefits
The transaction, still subject to regulatory approvals and customary closing conditions, is expected to be finalized during the second half of the year.
After completion, Parnassus partners will retain ownership of a significant portion of the company’s equity and manage day-to-day operations. In addition, Parnassus’ investment process will not change and the company’s investment team will remain fully independent. Additionally, Allen and Todd Ahlsten – CIO and portfolio manager – will enter into long-term employment contracts as part of the deal.
The addition of Parnassus will increase the ESG-focused assets under management (AUM) balance of affiliated managers to nearly $ 80 billion, with AUMs integrating ESG factors into the investment process to around $ 600 billion.
In addition, Affiliated Managers said, “With over 95% of its mutual fund assets under management in strategies with a Morningstar rating of 4 or 5 stars, and each of its equity funds retaining the best sustainability ratings, Parnassus intends to provide investors with risk-adjusted, returns by investing in high quality companies at reasonable prices. “
Affiliated Managers expects the deal to contribute $ 70 million to adjusted earnings before interest, taxes, depreciation and amortization as well as $ 1.30 to economic earnings per share for 2022.
These days, ESG investing is all the rage. The coronavirus pandemic has shifted investor interest to companies that perform well on ESG objectives.
ESG investing is one of the fastest growing segments of the investment management industry. So far this year, ESG-focused funds have attracted huge investments across the world.
Other investments by affiliated managers in sustainable investment fund managers include holdings in Boston Common Partners and Inclusive Capital Partners. Supported by these and other similar investments, the company is expected to continue to generate significant growth over time. In addition, the growing demand for equities and alternative strategies among institutional clients should continue to support its profitability.
So far this year, shares of affiliate managers have gained 64.1%, surpassing the industry’s 27.5% growth.
Image source: Zacks Investment Research
Currently, Affiliate Managers are ranked Zacks Rank # 3 (Hold). You can see The full list of today’s Zacks # 1 Rank (Fort Buy) stocks here.
Other finance companies taking similar action
Many financial companies have started to get ahead and participate in ESG investments over the past two years. This June, Black rock (BLACK – Free Report) announced an agreement to acquire the climate change scenario model from Baringa Partners and integrate it into its own Aladdin risk management system.
Likewise last month, JP Morgan (JPM – Free Report) has signed an agreement to acquire San Francisco-based start-up OpenInvest, which provides ESG investment management products. Additionally, the company, through the asset management division, announced an agreement to acquire Campbell Global, LLC, a forest management and woodland investment company. Through these initiatives, the bank seeks to directly mark the transition to a low-carbon economy and to offer ESG-conscious investment opportunities.
In addition, in November 2020, Moody’s (AGC – Free Report) acquired a minority stake in MioTech, as part of its efforts to deliver innovative ESG solutions and know your client solutions to Chinese financial markets. In 2019, it also acquired a majority stake in VigeoEiris, a world leader in ESG research, data and assessments.
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