RBC Wealth seeks deals to boost alternatives

  • Canada’s biggest player in high net worth
  • Two acquisitions in wealth management
  • Real estate manager is on its wish list

“On the asset management side, we have a viable organic strategy but relatively small business here compared to worldwide. We would be interested in acquisitions that broadened capability in that business,” George Lewis, group head, RBC Wealth Management and RBC Insurance, said on June 16.

“The alternative space is one where we are intent on increasing our capabilities particularly on the real estate management side,” he said at the Reuters Global Wealth Management Summit in New York.

In the last six years, Toronto-based RBC has made two major acquisitions in the wealth management business, buying Phillips, Hager & North Investment Management Ltd in 2008 and BlueBay Asset Management Plc in 2010. Now Lewis said he expects another purchase can be made within the next “couple of years.”

The bank will consider acquisitions of as much as C$2 billion as it seeks to expand its wealth management unit, but the pace will be measured and careful, Lewis said.

Lewis said he would “rather be three for three than six for 10,” in terms of successful acquisitions and the integration of a new purchase into RBC, the world’s sixth largest wealth manager.

“Opportunities in that C$1 to C$2 billion cumulative range over the next couple of years, that would be very much the size we are looking for, whether that comes in one or two or three components,” he said. “Building U.S. distribution, and increasing alternative capabilities, would be our principal focus.”

As investors and their advisers express new interest in alternative assets like hedge funds, private equity and real estate following the financial crisis, Lewis said a firm that specializes in alternative assets, particularly real estate investments, is high on its wish list.

He also said that adding some alternatives at a time when RBC is eager to flex its muscle worldwide would make sense because the bank has been a little “light” on alternatives compared with competitors like JPMorgan Chase and UBS.

But he noted that although the environment for mergers and acquisitions is more frenzied, with even private equity firms battling with banks and other traditional purchasers, RBC would prefer to enter only into exclusive deal negotiations instead of the auctions with other bidders.

Lewis stressed that the business would have to be a good fit. RBC is already very strong on the fixed income side, bolstered by the BlueBay deal in 2010, and now has clients who want more access to alternatives, including pension funds that have long liabilities and are looking for long duration assets with cash flow.

Andrea Hopkins and Svea Herbst-Bayliss are correspondents for Reuters in Toronto and Boston, respectively.