Deals & People July 20, 2010

Hewitt Expands Investment Consulting Reach

With the ink not yet dry on its merger nuptials with Aon, Hewitt Associates has announced a new acquisition.
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The global human resources consulting and outsourcing company today announced that it has entered into a definitive agreement to acquire EnnisKnupp, a provider of investment advisory services to large institutional investors.  Last Monday, Hewitt and Aon announced a merger of the two consultancies (see  

According to the announcement, the acquisition looks to boost Hewitt’s existing investment consulting capabilities in the U.S. and support its global growth plans. Under the terms of the agreement, Hewitt will acquire EnnisKnupp, which provides a wide range of investment consulting services to corporations, public funds, endowments, foundations, non-for-profits and Taft-Hartley plans. Once this transaction is complete, Hewitt says it will be one of the largest providers of investment consulting services in the U.S. and in the world, with nearly $3 trillion in assets under advisement.

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Two great names in investment consulting are joining forces to offer an expanded set of services to our valued clients,” said Russ Fradin, chairman and chief executive officer of Hewitt Associates. “EnnisKnupp’s highly regarded advisory capabilities and impressive client portfolio are a perfect complement to Hewitt’s well-respected actuarial business and extensive expertise in managing pension risk. Our commitment to be a top-tier global investment consulting player and the potential to combine forces with EnnisKnupp were also real positives for Aon in our proposed transaction.”

Hewitt Investment Group (HIG), Hewitt’s existing investment consulting practice in the U.S., specializes in advising defined contribution, defined benefit, endowment and foundation clients on investment management, pension risk and asset allocation solutions. Currently, EnnisKnupp’s 135 Chicago-based employees provide investment advisory services to 167 clients. HIG already serves 120 clients from offices in five major U.S. cities.

Steve Cummings, currently president and chief executive officer of EnnisKnupp, will lead the integrated Hewitt|EnnisKnupp operation reporting to Mary Moreland, Hewitt’s North American Retirement and Investment Consulting Leader. Steve will head up the U.S. leadership team comprised of principals from both organizations, including Bradley Smith, current leader of Hewitt Investment Group, and Russ Ivinjack and Steve Voss, principals at EnnisKnupp. Ian Peart, currently head of Global Manager Research at Hewitt, will lead the Global Manager Research function for the combined organization.

“As institutional investing becomes increasingly complex, organizations are looking for an advisor that has global reach and solid experience across actuarial, pension risk, plan administration and investment consulting services,” said Steve Cummings, president and chief executive officer of EnnisKnupp. “Together, we can meet the needs of a broader range of clients while staying true to our shared promise of exceptional client service with the highest levels of integrity and professionalism.”  

Financial terms of the agreement were not disclosed. The transaction, which is subject to customary closing conditions including regulatory approval, is expected to close during Hewitt’s fiscal 2010 fourth quarter.

Compliance July 19, 2010

Advisers Should Take Note of Financial Reform Bill Provisions

Certain provisions of the financial reform legislation approved by the U.S. Senate last week may affect financial advisers.

 

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While advisers are perhaps not directly subject to the strictest investigations and restrictions that will be imposed over the coming months, some will likely be held to a higher standard of accountability. 

Investment advisers – with the exceptions of those who manage venture capital or private equity funds – are required to register with the Securities and Exchange Commission (SEC). Registered investment advisers will be subject to a new fiduciary standard that requires them “to take steps to safeguard client assets over which [they have] custody, including, without limitation, verification of such assets by an independent public accountant.”

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The legislation also gives the SEC the authority to impose a fiduciary duty on brokers who give investment advice.

Investment advisers should also pay attention to the provisions on hedge funds because the bill raises the asset threshold for federal regulation from $25 – $100 million―a move expected to increase considerably the number of advisers under state supervision. 

The legislation also requires hedge funds and private equity advisors to register with the SEC as investment advisers and provide information about their trades and portfolios necessary to assess systemic risk.  Those advisers who manage private funds are expected to maintain records – and provide annual reports to the SEC – that include information regarding:

  • The amount of assets under management and use of leverage;
  • Counterpart credit risk exposure;
  • Trading and investment positions;
  • Their funds’ valuation policies and practices;
  • The types of assets held; and
  • Their trading practices.

The bill instructs the SEC to conduct inspections of private funds, and states that all such records and reports – including any of side investments or side letters that lend more favorable rights to some investors over others – are to be made available for review. 

The SEC will conduct a study to evaluate the current standards and directives imposed by the SEC, FINRA, and other federal and state regulation for their effectiveness and any potential gaps or overlaps that may exist. If any such problems are found, within two years of the bill’s enactment date, the SEC will commence a rulemaking that takes into account the conclusions and recommendations of the study to address those oversights.

Further information can be found at http://banking.senate.gov/public/_files/070110_Dodd_Frank_Wall_Street_Reform_comprehensive_summary_Final.pdf.

To see the bill in its entirety, go to http://banking.senate.gov/public/_files/ChairmansMark31510AYO10306_xmlFinancialReformLegislationBill.pdf . 

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