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The Ontario Teachers’ Pension Plan has agreed to buy UK wealth manager Seven Investment Management, as one of Canada’s biggest investors bets on a sector that is rapidly consolidating.
OTPP is acquiring 7IM, which was founded in 2002 and manages about $21bn in assets, from Caledonia Investments, the companies said on Tuesday. The deal gives 7IM an enterprise value of about £450mn, according to people familiar with the matter.
The move by OTPP comes as wealth and asset managers are bulking up amid rising costs and downward pressure on fees. However, Iñaki Echave, senior managing director at OTPP, said the fund had spent three years looking to buy a UK wealth manager, pointing to several potential tailwinds for the sector.
“Further flows will be supported by pension reforms, wealth advisors are having increased demand and demographic trends mean the government will continue incentivising savings,” he said.
Following the deal, OTPP will own 90 per cent of the business with 7IM’s management holding the rest. 7IM was bought eight years ago by Caledonia, an investment trust linked to the Cayzer family that made its fortune in the shipping business. Caledonia’s stake in 7IM was valued at £187mn as of March 31.
The Canadian fund already has significant investments in the UK. Last year it bought a 25 per cent stake in SSEN Transmission, a division of Scottish energy company SSE, for £1.5bn. It also holds stakes in London City, Bristol and Birmingham airports.
7IM adds to the more than C$10bn in direct investments OTPP has in the financial services sector and the wealth manager will sit within its roughly C$60bn private equity portfolio. 7IM’s chief executive Dean Proctor will continue to lead the firm after the deal has closed, which is expected to be by early next year.
“We are well positioned for our next phase of growth, and introducing a new investor in Ontario Teachers’ is a natural and planned next step in the development of 7IM,” Proctor said. 7IM was advised by Evercore.
OTPP plans to accelerate 7IM’s expansion, including through potential acquisitions. Based in London and Edinburgh, 7IM runs assets for more than 2,300 advisory firms and 7,000 private clients in the UK.
Echave said OTPP may seek “bigger targets” within UK wealth management. “We have an ambition of building a larger-scale player in the sector . . . it’s a sector that benefits from scale and high-quality service,” he said.
OTPP is betting on a sector where smaller firms have struggled in recent years. One in six asset and wealth managers will go out of business or be bought up by bigger groups by 2027, according to a report by PwC earlier this year, which cited a mix of market volatility, high interest rates and pressure on fees.
OTPP, which has almost C$250bn ($180bn) in assets, manages the pensions of 336,000 teachers in Canada’s most populous province.
The ability of OTPP to invest in public equities alongside infrastructure, venture capital and property has helped it deliver average returns of 9.5 per cent a year since it was set up in 1990.
Its model has been adopted across Canada’s public sector, where it is part of the “maple eight” of pension plan investment managers who collectively manage about $1.5tn.