Franklin Templeton has announced the acquisition of leading European credit and private debt manager Alcentra from BNY Mellon in a move that will significantly expand the US-based global investment group’s activities in the fast-growing global alternative credit space.
The combination of Alcentra, which has USD38 billion in assets under management, with Franklin’s US-focused specialist alternative credit investment manager affiliate Benefit Street Partners (BSP) will double BSP’s AUM to USD77 billion and increase Franklin Templeton’s groupwide alternative assets under management to more than USD250 billion.
One of the largest and longest-established European credit and private debt specialists, Alcentra has global expertise in senior secured loans, high-yield bonds, private credit, structured credit, special situations and multi-strategy credit strategies.
Founded in 2002, the firm employs a disciplined, value-oriented approach to evaluating individual investments and constructing portfolios across its investment strategies on behalf of more than 500 institutional investors. Alcentra’s team of approximately 180 professionals is based in its London headquarters, as well as in New York and Boston.
“We’re delighted to announce the acquisition of Alcentra and look forward to welcoming its talented team to our firm,” says Jenny Johnson, president and CEO of Franklin Templeton. “We have been deliberate in building our alternative asset management capabilities over recent years and the acquisition of Alcentra is an important aspect of our alternative asset strategy – the expansion into alternative European credit.”
Johnson adds: “Alternative investments represent a significant diversification tool for our clients and an area of increasing importance for both individual and institutional investors. This acquisition expands our long-standing relationship with BNY Mellon, and we are pleased that the structure of the transaction achieves objectives for both Franklin Templeton and BNY Mellon in the context of current market conditions.”
The transaction is expected to be completed early in the first quarter of 2023. Franklin Templeton will pay USD350 million in cash at close and up to a further USD350 million in contingent consideration dependent on the achievement of certain performance thresholds over the next four years. In addition, Franklin Templeton has committed to purchase all seed capital investments from BNY Mellon related to Alcentra which, as of March 31, 2022, were valued at approximately USD305 million.
Upon closing, BNY Mellon Investment Management will continue to offer Alcentra’s capabilities in BNY Mellon’s sub-advised funds and in select regions via its global distribution platform, and BNY Mellon will provide Alcentra with ongoing asset servicing support.
Tom Gahan, CEO of BSP and head of Franklin Templeton Alternatives, says: “We believe the addition of Alcentra will elevate Franklin Templeton and BSP to a leading position in global alternative credit. Alcentra is highly complementary to our existing US capabilities, with no overlap in Europe. This partnership will unlock new opportunities to offer broader global credit solutions to our clients who are increasingly allocating capital to this growing asset class.”
BSP, a wholly-owned subsidiary of Franklin Templeton’s California-based parent company Franklin Resources, is a leading credit-focused alternative asset management firm with almost USD40 billion in assets under management as of March 31, 2022. The firm manages assets across a broad range of credit strategies, including private/opportunistic debt, structured credit, high yield, special situations, long-short liquid credit and commercial real estate debt. Based in New York, the BSP platform was established in 2008.
Hanneke Smits, CEO of BNY Mellon Investment Management, says: “We’re extremely pleased to be strengthening the partnership with Franklin Templeton and continuing to offer Alcentra’s credit capabilities as part of the broad range of alternative solutions we already offer today. We look forward to ongoing collaboration with the combined institution through distribution and further building on BNY Mellon’s existing asset servicing arrangement.”
Adds Jon DeSimone, CEO of Alcentra: “Today’s announcement is the beginning of an exciting new chapter for Alcentra as a dynamic credit partner for our investors. BNY Mellon has provided strong support over the years and has contributed significantly to our growth with assets under management doubling since 2014. The global combination of Franklin Templeton and BSP’s highly complementary capabilities will enable us to collectively provide clients with solutions across the credit spectrum.”