Royal Bank of Canada's acquisition of London-based BlueBay Asset Management in 2010 raised RBC's profile in Europe and made the bank into a top-10 player in global wealth management. Today, though, the deal also offers an insight into RBC's approach to integrating City National Corp.
RBC has big expectations for Los Angeles-based City National, the private bank serving high-net-worth individuals (many of them Hollywood stars). After the deal was announced in January, Dave McKay, RBC's chief executive officer, said it combined a solid U.S. brand with his bank's robust balance sheet, creating what he called a "1+1= 4" scenario.
Based on RBC's recent deals, he might be onto something here.
Damon Williams and Alex Khein, co-CEOs at RBC Global Asset Management, used the fifth anniversary of the BlueBay deal as a pretext to discuss the bank's asset management strategy – and they agreed that RBC's heft can add a lot to its acquisitions.
BlueBay's assets under management have risen to more than $76-billion as of June 30, up 88 per cent since the fixed-income manager was acquired. Vancouver-based Phillips Hager & North Management, which RBC acquired in 2008, has seen its assets under management rise to nearly $87-billion, up more than 40 per cent – over a period when the S&P/TSX composite index is roughly unchanged.
Part of the driver here, they believe, is the power of uniting brands: "If you are an institutional investor looking for fixed-income credit expertise, you will almost certainly come to BlueBay first because of our reputation," said Mr. Khein, who was chief operating officer at BlueBay before it was acquired.
"But in the context of due diligence, you will be comforted by the safety, balance sheet, risk culture and reputation of RBC."
The financial crisis only boosted that comfort level.
But the benefits go beyond brand. Mr. Williams, who was a portfolio manager at PH&N before it was acquired, said RBC's financial resources have helped expand the firm's investment offerings at a time when Canadian investors have shown a greater appetite for global investments.
"RBC's capital has given us the financial strength to go out and buy or hire ... and expand that tool kit," he said.
RBC also provides seed capital to invest in new investment opportunities, which far outweighs the financial resources that BlueBay or PH&N had prior to being acquired.
Mr. Williams said RBC has authorized about $800-million to incubate new strategies – in essence, experimenting with ideas in-house rather than using client money – compared to funds of just $10-million to $15-million at PH&N before being acquired.
"The expansion of seed capital at our disposal has radically accelerated our research and development," he said. "And that has been an attractive calling card for talent, for people who are interested in being part of a firm that is innovating and trying new things."