Deals & People February 25, 2025

Private Equity Dominates Wealth Management M&A Activity

M&A deals with private equity backing have surged over the past decade, according to Fidelity.

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Private equity is the “new, prominent player” in the M&A industry, as it private equity-backed deals made up 89% of all transactions during 2024, up from 39% five years earlier, according to a report from Fidelity Investments that tracked and analyzed M&A deals from 2015 through 2024.

“Private equity continues to fuel our industry,” the report stated. “Private equity continues to be attracted to the appetite for financial advice, coupled with the steady stream of fee-generated cash flow and the opportunity to capitalize on the wealth transfer.”

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According to Fidelity’s research, April 2024 was the first month during which all registered investment adviser M&A transactions were backed by private equity firms, which occurred again in November and December. The report also noted that the number of minority-stake transactions in 2024 increased to 41 from 26 in 2023.

Fidelity stated that 2024 was a “record-breaking year” for wealth management M&A deals, surpassing 2023’s total by six deals. Deals worth more than $1 billion accounted for 35% of all transactions, up from 29% the previous year, while the median value of the transactions for the year was up 28% to $536 million, compared with the previous year.

Over the 10-year period, the number of registered investment adviser M&A deals surged to 233 in 2024 from 89 in 2015, which is a 14% compound annualized growth rate over 10 years, according to Fidelity. The value of purchased assets increased more than fivefold to $669.8 billion from $130 billion, while the median deal size grew to $536 million from $500 million during the period.

“Since Fidelity Investments began tracking transactions in 2015, we have witnessed profound change in the M&A space, including the acceleration of transactions, the size of deals, and the players involved,” the report stated, adding that purchased assets for RIA and broker/dealer M&A deals totaled nearly $909.7 billion in 2024.

The report cited major private equity investments in RIA firms since Fidelity began tracking private equity in wealth management M&A in 2016. Notable transactions included KKR and Stone Point Capital’s investment in Focus Financial, which went public in 2018 before being taken private again by Clayton, Dubilier & Rice in 2023. The report also cited Thomas H. Lee Partners’ investment in Hightower in 2017 and Oak Hill Capital and Genstar Capital’s 2018 investment in Mercer Advisors, among others.

“With the typical PE hold period described to be five to seven years, we may be experiencing a third wave of PE capital entering our industry” over the past 10 years, the report said. “Conversations with strategic acquirers and private equity stakeholders suggest that while PE is typically not expected to be forever capital, PE has expressed willingness to invest a bit on the longer end of the hold period.”

The Fidelity report also projected an increase in first-time acquirers during the coming decade.

“An interesting question remains: what percentage of these acquirers will be backed by private equity?” the report stated. “Will there be a tipping point in the next decade of private equity taking a larger controlling stake in wealth management firms? And if so, could this be where the mega-merger is born?”

Data & Research February 25, 2025

Public Pension Plans Reach 5-Year High of 83.1% Funded

The funds returned 9.47% in fiscal 2024, according to a National Conference of Public Employees Retirement System study.
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Public pension funds’ funded status has risen to a five-year high amid equity market strength, according to a study from the National Conference of Public Employees Retirement Systems.

The annual NCPERS retirement study, which the organization has conducted since 2011, found that the average public pension has seen its funded status reach 83.1% through the first half of 2024, typically when the fiscal years for these plans ended.

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The report also found that discount rates have decreased to an average of 6.67% in the first half of 2024 from 7.31% in the first half of 2021. Over the past five, 10 and 20 years, these funds reported annualized returns of 7.15%, 6.24% and 6.88%, respectively.

“This robust dataset tells a clear story of resilience and strength,” wrote Hank Kim, executive director and counsel at NCPERS, in the report. “In the span of 20 years, public pensions have endured two major economic crises. Yet with strong governance policies and efficient practices in place, pensions have shored up funding levels and improved their long-term fiscal health.”

The plans surveyed by NCPERS, on average, have a 41.5% allocation to equities, 29.7% to alternative investments, 26.1% to fixed income and 2.7% to cash equivalents and other.

Approximately 67% of plan assets under management by survey participants are managed externally. Another 23% said they partially manage their assets in-house. Only 4% of respondents said they managed all assets in house, and another 5% said they took other approaches.

Looking ahead, the report found that some of the biggest priorities in 2025 for these pension funds include improving their cybersecurity, sustaining their pension funding levels, updating their pension administration systems and determining the role of artificial intelligence in pension management.

NCPERS surveyed 201 public pension funds between September 19 and November 14, 2024. Survey respondents collectively manage $3 trillion in assets. Approximately 89% of respondents were defined benefit plans, 10% were combined defined benefit/defined contribution plans, 7% were defined contribution plans and 1% were cash balance plans.

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