Invesco Ltd. is in talks to merge with State Street Corp.'s asset management business, people familiar with the matter said.
A deal isn t imminent, and the discussions may not result in an agreement, the people said. It isn t clear what the terms of a potential deal would look like, but it would likely be one of the largest businesses in recent memory, given State Street's asset management unit manages nearly $4 trillion in assets.
State Street is one of the largest insurance banks providing accounting services to other financial managers.
The firm s own investing unit, State Street Global Advisors, remains a leading seller of exchange-traded funds, the low-cost investing structure the firm pioneered.
It is valued at about $11 billion, compared with around $32 billion in State Street.
State Street share prices rose more than 1% in the last three quarters.
Investors appetite for lower-cost funds have thinned profit margins across the asset management industry. While the stock market rally has helped mask some of these challenges, firms continue to feel pressure to reduce expenses and lower investment management fees, which can be achieved by combining forces. Many asset managers, small and large, are contemplating where they stand in an investing world reshaped by technology and are examining deals with rivals.
The consolidation in the industry has picked up precipitously in the last years, and both Invesco and State Street have been active deal makers. Invesco snapped several other asset managers in that - including OppenheimerFund Inc. and Guggenheim Partners, ETFs - business services. Charles River Systems Inc. expands its asset-servicing arm, adding financial-data firm State Street. Earlier this month the Boston-based bank agreed to acquire Brown Brothers Harriman Co.'s investor services unit for $3.5 billion in cash.
Goldman Sachs Group Inc. hired State Street to review its accounting options, the Journal reported in December.
As the firm weighed these options, State Street executives decided the business needed to get bigger to remain competitive. They determined that merging the asset management business with a rival was the best path forward, the journal reported. State Street reached out to several potential partners, including UBS Group AG.
UBS'plan was drawn from State Street, and the two banks worked toward a tie-up of their investing businesses. For a time last year, an agreement appeared probable. State Street and UBS had even thought about roles for some of the venture s top executives and were considering names for the new stand-alone manager, the Journal reported. Meanwhile, Janus HendersonHenderson Group PLC was a major shareholder in Invesco and fellow asset management company Trian Fund Management LP last fall. The New York shareholder activist aimed to push the companies to grow through deal making to better compete with the world's largest asset managers, such as BlackRock Inc.
Roughly a month later, Trian struck a settlement agreement with Invesco, including seats on its board for two of its founders, Nelson Peltz and Ed Garden. FactSet owns a share in the asset manager valued more than 8%, according to Trian.
It also had a history with State Street: In 2010, Trian took a position in the company after noticing it was trading poorly following the financial crisis, according to Trian s website. There are many changes when Trian called on State Street to improve its margins. Trian sold the position in 2013 after company performance improved.