7IM, a UK wealth manager, acquired by Ontario Teachers’ fund

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The Ontario Teachers’ Pension Plan (OTPP) has made a strategic move by acquiring UK wealth manager Seven Investment Management (7IM). In the rapidly consolidating sector, OTPP’s purchase of 7IM, founded in 2002 and managing approximately $21bn in assets, from Caledonia Investments has given 7IM an enterprise value of around £450mn. This acquisition aligns with wealth and asset managers’ efforts to scale up due to increasing costs and fee pressure. OTPP’s Senior Managing Director, Iñaki Echave, expressed optimism for the UK wealth management sector, citing pension reforms, rising demand for wealth advisors, and government incentivization of savings.

Upon completion of the deal, OTPP will hold a 90% ownership stake in 7IM, with the remaining share held by 7IM’s management. Caledonia, an investment trust linked to the Cayzer family with roots in the shipping industry, acquired 7IM eight years ago. As of March 31, Caledonia’s stake in 7IM was valued at £187mn. OTPP already has significant investments in the UK, including a 25% stake in SSEN Transmission and holdings in London City, Bristol, and Birmingham airports.

The addition of 7IM contributes to OTPP’s extensive investments in the financial services sector. With over C$10bn in direct investments, 7IM will be part of OTPP’s C$60bn private equity portfolio. Following the completion of the deal, 7IM’s CEO Dean Proctor will maintain his leadership position within the company. OTPP, advised by Evercore, intends to support 7IM’s expansion and explore potential acquisitions. 7IM, based in London and Edinburgh, manages assets for more than 2,300 advisory firms and 7,000 private clients in the UK.

Echave envisions further growth opportunities in the UK wealth management sector, expressing the ambition to build a larger-scale player through potential acquisition of “bigger targets”. This investment by OTPP comes at a time when smaller firms in the sector have faced challenges, with predictions that one in six asset and wealth managers will either go out of business or be acquired by larger groups by 2027. PwC’s report highlighted market volatility, high interest rates, and fee pressure as contributing factors.

With nearly C$250bn ($180bn) in assets under management, OTPP is responsible for overseeing the pensions of 336,000 teachers in Canada’s most populous province. Their investment strategy, which encompasses public equities, infrastructure, venture capital, and property, has resulted in average annual returns of 9.5% since the fund’s establishment in 1990. This successful model has been adopted by other pension plan investment managers across Canada, collectively managing approximately $1.5tn, forming the group known as the “maple eight”.