Historic Schroders Acquisition Raises Questions Over Cazenove Capital's Role
The City of London was left reeling last Thursday when one of Britain's oldest financial institutions, Schroders, announced a surprise £9.9bn takeover by American investment giant Nuveen. This monumental deal ends over two centuries of independence for the storied asset manager and creates one of the world's largest active asset management entities, with nearly £1.8 trillion in combined assets under management across institutional and wealth channels.
Vague Details Leave Wealth Management Future Unclear
While the announcement confirmed Schroders would retain its brand and maintain London as the group's non-US headquarters, with shareholders receiving 612p per share, it provided frustratingly little detail about the future of Schroders' high net worth wealth management business, Cazenove Capital. Both Schroders and Nuveen offered minimal insight into how Cazenove would integrate into the combined entity, despite the wealth management division long being considered a star asset within the Schroders portfolio.
Schroders originally acquired Cazenove for £424m in 2013, securing the business to significantly bolster its UK wealth management and private banking capabilities. The acquisition granted Schroders access to Cazenove's prestigious high net worth client base, adding substantial assets under management—approximately £17.2bn at the time of purchase.
Industry Speculation About Potential Divestment
The conspicuous lack of attention on Cazenove in the merger announcement has led some industry figures to speculate that the combined entity might consider offloading the wealth management business. Jonathan Moyes, head of investment research at Wealth Club, observed: "Cazenove is a well respected wealth management brand, but as part of Schroders, it tends to get overlooked and perhaps does not always get the limelight it might feel it deserves."
Moyes continued: "Running a UK wealth management business is clearly not aligned with the core strategy of Schroders, nor TIAA. Both appear intent on achieving immense scale across both their public and private market asset management businesses." He noted that unlike the Evelyn Partners deal, where multiple bidders competed before Natwest acquired the firm for £2.7bn, Cazenove hasn't attracted similar interest—yet.
"We suspect the prospect of offloading Cazenove to another firm that can give it its full attention may prove too tempting," Moyes added, highlighting the potential for strategic divestment.
Counterarguments for Retaining the Jewel
However, other analysts argue that if properly utilized, Cazenove could become a significant success story for Nuveen. Rae Maile, research analyst at Panmure Liberum, emphasized: "Cazenove Capital has been a jewel in the crown for Schroders and can be for Nuveen too if respected, managed and backed."
Maile pointed to the UK's limited structural growth opportunities, noting that wealth management represents one of the few exceptions. "Cazenove Capital has a fantastic brand, backed by financial strength and the capabilities of the larger Schroders group both in terms of research but also product range and product structuring," he explained. "It is rare among wealth managers...having these capabilities in-house."
Cazenove serves what industry insiders describe as the "properly wealthy" with a minimum investment threshold of £1m and is expanding its presence in the family office market, providing access to a broader consumer base than many competing wealth management firms.
Strategic Considerations and Historical Lessons
Maile also noted that Nuveen's intention to retain the Schroders brand should logically extend to preserving the Cazenove brand, particularly since the American firm also operates in wealth management. He urged the company to "learn the lesson" of JP Morgan, which invested substantially in the Cazenove brand for investment banking purposes only to largely abandon it later.
The merger announcement did indicate that both Nuveen and Bidco, a new subsidiary of the US firm, plan to "strategically maximise each brand," with Nuveen intending to maintain Schroders' existing investment and client teams. The statement highlighted shared focus on "driving future growth through the wealth channel" and developing "a more globally diversified" wealth management proposition.
Broader Industry Implications
The acquisition raises significant questions about the future direction of the wealth management industry as a whole. The announcement coincided with a week that saw share prices for numerous wealth managers decline following the unveiling of new AI tools designed to assist individuals with wealth management.
Despite facing substantial pressure from artificial intelligence, intense regulatory scrutiny, and high operational costs, the UK wealth management industry appears to be "in rude health," according to observers. Assets under management continue growing steadily, and multiple firms are positioning themselves to acquire businesses as companies seek new ownership structures.
Moyes concluded with an optimistic outlook: "The outlook feels positive with lots of innovation coming that should help to support margins and improve the ways in which these firms serve their clients. It should be an exciting decade for the wealth management industry."
Schroders declined to provide additional comment beyond the initial merger announcement, leaving the financial community to speculate about the ultimate fate of one of London's most prestigious wealth management brands.