Ontario Teachers’ Pension Plan agreed to purchase UK wealth manager Seven Investment Management as one of Canada’s largest investors bets in a sector which is rapidly consolidating.
OTPP has acquired 7IM from Caledonia Investments. 7IM was founded in 2002, and currently manages assets worth about $21 billion. According to sources familiar with the deal, 7IM now has an enterprise value of approximately £450mn.
OTPP’s move comes at a time when wealth and asset management firms are expanding due to rising costs and pressure on fees. Inaki Echave said that the fund spent three years searching for a UK wealth management firm.
He said that “further savings will be encouraged by the pension reforms. Wealth advisors have increased demand, and demographic trends will mean that the government continues to encourage saving.”
OTPP now owns 90% of 7IM, with the management holding the remaining 10%. Caledonia is an investment trust that has ties to the Cayzer shipping family. They bought 7IM eight years ago. Caledonia valued its stake in 7IM at £187mn on March 31.
The Canadian fund has already made significant investments in the UK. It bought a 25% stake in SSEN Transmission (a division of Scottish Energy Company SSE) for £1.5bn last year. It also owns stakes in London City Airport, Bristol Airport and Birmingham Airport.
7IM will add to the over C$10bn OTPP invests in the financial sector, and the wealth manager is part of its approximately C$60bn portfolio. 7IM’s Chief Executive Dean Proctor will lead the firm once the deal is closed. This should be early next year.
Proctor stated, “We’re well-positioned for our next growth phase and the introduction of a new investor to Ontario Teachers’ was a planned and natural next step in 7IM’s development.” 7IM was advised Evercore.
OTPP intends to accelerate 7IM’s expansion through acquisitions, among other things. 7IM, based in London and Edinburgh manages assets for over 2,300 advisory firms in the UK and 7,000 private customers.
Echave stated that OTPP could be looking for “bigger targets” in UK wealth management. “We want to build a bigger-scale player within the sector. . . It’s a service sector that is able to benefit from its size and quality,” he said.
OTPP is betting in a sector that has seen smaller firms struggle over the past few years. A report from PwC published earlier this year stated that one in six asset managers and wealth managers would go out of business by 2027 or be acquired by larger groups.
OTPP manages the pensions for 336,000 teachers across Canada’s largest province.
OTPP’s ability to invest in infrastructure, venture capital, and property alongside public equities has allowed it to deliver an average return of 9.5 percent per year since its establishment in 1990.
The model is used in the public sector of Canada, where it is part of a group of investment managers that collectively manages about $1.5tn.