grail - dreams and night sweats - the shape and future of...

Dreams and Night Sweats: The Shape and Future of Money Management

Donald H. Putnam

Darlene T. DeRemer

Grail Partners LLC

May 11, 2006

Catalysts: Current Inflection Points in Asset Management

� MBO / LBO / New Financing

� IPO / Reverse Mergers

� PROLIFERATION

� PE Firms are Awash in Cash

� Public Markets are Eager

� Globalization a Failed Model

Market Factors

� Resurgence of the Global Banks

� Brokers go for Distribution

� Alternative Crossover

� MONGRELIZATION

� Failure of Style Allocation

� Death of DB, Triumph of DC

� Segregated Alpha / Beta

� The “New” Quants

Institutional

ConsequencesCatalysts

� Resurgence of Global Banks

� Brokers Chose Distribution

� MATURATION

� Ownership is optics: Capacity is Key

� Ageing PE Founders

� RE Continues to Evolve

Alternative

� Divestiture

� Fund Adoptions / Mergers

� Open Architecture

� CONSOLIDATION

� Scale challenges

� Conglomerate illogic

� Transparent Performance

� ETFs and Quant Lifestyle

� New Paradigm Distribution

US Retail

The Big Picture

An Owner’s First Challenge is Strategy

The Big Picture

WEAKProduct

SUPERB Product

Sharpen incentives for alpha

Enforce absolute transparency

Create a fiduciary culture

Build research edge

Innovative in risk mgmt

Control price vs. capacity

Aggressively solicit channels

Select the best partners

Over-support sales activities

Deploy capital aggressively

Never grant exclusivity

Over-communicate and over-service clients and channels

GLOBAL or BROAD Channels

NARROW or LOCAL Channels

Lessons From the Past

Source: SNLFinancial, Nelson’s, Institutional Investor

The Big Picture

($ in millions)

Rank Firm Name 2005

1 Barclays Global Investors $1,513,000

2 State Street Global Advisors 1,441,000

3 Fidelity Investments 1,207,000

9 Capital Group 1,142,000

4 BlackRock Inc. 991,000

5 Vanguard Group, Inc. 951,000

6 Legg Mason Inc. 850,800

7 JPMorgan Asset Management 847,000

8 Mellon Financial Corporations 781,000

10 AXA Group 690,000

Rank Firm Name 1995

1 Fidelity Investments $426,742

2 Prudential 271,500

3 Mellon Financial Corporations 251,713

9 State Street Global Advisors 231,722

4 JPMorgan Asset Management 227,416

5 Capital Research 216,909

6 Equitable Cos 205,000

7 Bankers Trust 202,168

8 Metropolitan Life 171,594

10 Travelers 166,346

Perform, Gather, Grow: Simple…?

Source: Morgan Stanley as of November 22, 2005

� Performance drives flows and flows drive valuationThe Big Picture

5 Year Outlook: Continued Fragmentation; Opportunities Everywhere

� Open architecture expands shelf space and product offerings

� The rollover boom

� Retirement income focus

� Separate accounts to mainstream

� Explosion in alternatives

� New advisory models

� Global opportunities emerge

Source: Empirical Research, Federal Reserve Board, US Department of Labor, Employee Benefits Institute, Cerulli Associates, Investment Company Institute, NAVA, VARDS, FIDC, Venture Economics, Hedge Fund Research, TASS Research, NUCUBO, The Foundation Center, Holmes Research, College Savings Plan Network, Insurance Asset Manager Survey, Corporate Reports, Grail Partners Estimates

0.0 2.0 4.0 6.0 8.0 10.0

College Savings Plans

Insurance Co. Outsourcing

Foundations & Endowments

ETFs

Hedge Funds

Private Equity

Bank Personal Trusts

Variable Annuities

Separate Accounts

Retail MFs

IRA Accounts

DC Plans

DB Plans

Other Assets: 8.9% annually to $2.4 trillion

Retail Assets: 9.3% annually to $14.9 trillion

Retirement Assets: 6.8% annually to $16.2 trillion

2005 Assets 2010 Assets

Projected Industry Growth

AUM ($ trillions)

CompoundAnnual Growth

12%

9%

9.5%

9%

11%

9%

4%

9%

7.5%

20%

8%

9%

2%

Product Perspectives

Financial Assets by Affluence and Asset Type - $21T total 2004


$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

Mass Mrkt Retail Affluent HNW

($ billions)

Cash, CDs, MMFs Bonds Stocks

Mutual Funds NEC IRAs and DC Plans Other Managed

Other

Source: ICI, FRB, Census Bureau, ICI, SIA. Includes long and short term mutual funds and VAs; excludes assets in bank trusts, inst MMFs and other institutional assets. Thomas H Mack & Co., Bobroff Consulting, Grail Partners

Product Mix Today

Source: ICI, MMI, Others, Grail Partners, Thomas M. Mack & co. and Bobroff Consulting estimates.

� Mutual Funds remain the dominant product solution

Asset Management Industry:

$11 Trillion in AUM


Funds DC Plans

17%

Funds VA-

Nonqual

7%

Funds

Corporations

5%

Funds all other

52%

Managed

Accounts

6%

Hedge Funds

10%

ETFs

3%

3-Yr CAGRS by AM Sector

� Hedge Funds, SMAs, and ETF growth outpace traditional mutual funds

Historical Three-Year CAGRs

14%

16%

22%

40%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

US Mutual Funds Hedge Funds SMAs US ETFs


Source: Simfund, HFR, ICI, Cerulli, Grail Partners.

Source: Grail Partners LLC

All Roads Lead Through Platforms

Distribution Dynamics

Investment Management Platform

Equities Fixed Income Nontrad. Investments Policy Ancillary

Services

Investment Products

Distribution Outlet

Lgecap

Growth

Smcap

Grow

Intl.

Eq

Rate

Antic.

Qual

Spds

Intl.

F I

Real

Est

Nat

Res

Strat

AA

Tactl

AA

Actuary-

Demogr.

Custody-

Trust

Record-

keeping

Perf

Anal

Assembly

Separate

Accounts

Mutual

Funds

Trust

Pools

Variable

Life prodFoFs

Bundled

Ret plns

Retail

Dir mkt

Brokers Planners Bankers Insur

Agents

Retirement

Plan Sponsors

Found-

Endow

End Consumers

Distribution

Consultants

PEHedge

� Structure of the investment management business

Major Packaged Investment Product Segments

Source: ICI, FRB, Census Bureau, ICI, SIA. Includes long and short term mutual funds and VAs; excludes assets in bank trusts, inst MMFs and other institutional assets. Thomas H Mack & Co., Bobroff Consulting, Grail Partners

Standard

Load/ No-Load

DC Plans

Fund WRAP

and Marts

Managed

Accounts

$0

$5,000

$10,000

$15,000

$20,000

$25,000

2005 2015

($ billions)

Standard Load/ No-Load DC Plans

Fund WRAP and Marts Managed Accounts

31%59%


Advice-Based Distribution Is the Retail Way

� Advisors gaining share of investable assets as direct sold continues to decline


Source: ICI and Cerrulli, adapted from LPL Financial Services.

US Mutual Fund Assets Under Management - Direct

Purchased vs. Advisor-Sold %

Advisor

69%

Advisor

80%

Direct

31%

Direct

20%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1998 2005

UMA Platform Schematic


Source: Dover Financial Research

Unified Managed Account

• Single Account

• Single Registration

•Multiple products

Investments

Overlay Portfolio Management

• Active

• Passive

• Hybrid

Manager A

Manager B

Manager C

Fund A

Fund B

Fund C

ETFs

Other

SMA MF Alternative Products

Range of Overlay Capabilities

• Tax management

• Rebalancing

• Wash sales

• Customization

• Other

Account Attributions

• Single proposal system

• Client assessment

• Product neutral fee

• Consolidate performance reporting

UMA Platform

Platform Growth = Pricing Power

� Distributors capturing increasing share of fees away from manufacturers


Source: LPL Financial Services.

Managed Accounts

Distribution

Share

67%

Distribution

Share

76%

Manufacturer

Share

33%

Manufacturer

Share

24%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000 2004

U.S. Retirement Plan Assets, 1995-2004

Source: Federal Reserve Flow of Funds, 1995-2004, and EBRI Pension Investment Report

1.44

1.54 1.78 1.95

2.09

1.95

1.71

1.44

1.72 1.87

1.31 1.52

1.85

2.11 2.27

2.3

2.12

1.82

2.25

2.55

1.29 1.47

1.73

2.15

2.65

2.63

2.62

2.53

3.08

3.48

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

$ Trillions

Defined Benefit Defined Contribution IRA

1997 was cross-over

year for DC dominance

1998 was cross-over year

for IRA dominance

Retirement Realities


Accumulation

� Annuities (fixed, immediate, variable)

� Fixed income

� Insurance, LTC

� Charitable remainder trusts

� Draw-down of accumulated assets to generate income

� Preparation for final years and wealth transfer

� Retirement years

� Drawing on health care provisions

� Gifting, bequeathing remaining wealth

� Gains need to be preserved

� Concentrated stock positions need to be hedged

� Asset protection is primary concern

� Focus almost solely on managing/growing assets

� Modular or needs-based planning (education planning, home purchases, etc)

Goals

� Fixed income instruments

� Non-correlated structured products, hedge FOFs

� Mid 50s until retirement

� Long-term care

� Insurance products for tax-advantaged wealth transfer

� Funds, separate accounts, ETFs, etc

� IRA, 401(k), 529

Products & Vehicles Used

� Generational/ spousal transfer

� Working age up to mid 50s

Description

� Annuities (fixed, immediate, variable)

� Fixed income

� Insurance, LTC

� Charitable remainder trusts

� Draw-down of accumulated assets to generate income

� Preparation for final years and wealth transfer

� Retirement years

� Drawing on health care provisions

� Gifting, bequeathing remaining wealth

� Gains need to be preserved

� Concentrated stock positions need to be hedged

� Asset protection is primary concern

� Focus almost solely on managing/growing assets

� Modular or needs-based planning (education planning, home purchases, etc)

Goals

� Fixed income instruments

� Non-correlated structured products, hedge FOFs

� Mid 50s until retirement

� Long-term care

� Insurance products for tax-advantaged wealth transfer

� Funds, separate accounts, ETFs, etc

� IRA, 401(k), 529

Products & Vehicles Used

� Generational/ spousal transfer

� Working age up to mid 50s

Description

PreservationRetirement Income

Wealth Transfer

Investor Lifecycle Affects Financial Product Needs


Pay-As-You-Go: Gone…

� Increase in retirees will spur a large "money in motion" eventRetirement Realities

Source: The Retirement Journey.

Retirement Asset Annual Distributions ($ billions)

DC Plans,

$224

DC Plans,

$546 IRAs, $152

IRAs, $378

DB Plans,

$131

DB Plans,

$162

$507

$1,086

$0

$200

$400

$600

$800

$1,000

$1,200

2004 2012E

The Pieces of the Puzzle

Defined BenefitSystem

Defined ContributionSystem

Income

Wealth Accumulation

Liability/Cost Burden

Cost Efficiency

Plan Sponsors ParticipantsRetirementSolutions


Manufacturing Retirement Solutions

DC

Annuity

DB Individual Pension Account

Defined Contribution

Defined Benefit

Investment Choice

Variable Benefit

Single Offering

Fixed Benefit

� Existing parts are being used to create new guaranteed income (e.g. Personal Pensions) investment solutions within the definedcontribution system and we expect this trend to continue


What Does The Future Hold for DC?

Future Defined Contribution Menu

CoreMenu

LC SC Intl BD Cash

Accumulation

Traditional

Deferred

Forward Income Solutions

Variable

Income For Life

Insurance

Managed PensionSolutions

Income Level

IncomeLevel

Individual Pension

Managed

� Potential new plan designs: Retirement Realities

Dire Straits


Estimated Decrease in Balance Sheet due to Accounting Changes (before taxes)

-$31.6

-$16.9

-$11.4

-$10.3

-$10.1

-$1.8

-$8.6

-$4.7

-$4.6

-$4.5

-35 -30 -25 -20 -15 -10 -5 0

General Motors ($15.6)

IBM ($33.1)

Boeing ($11.1)

General Electric ($11.7)

Ford ($14.0)

AT & T ($54.7)

Lockheed Martin ($2.8)

DuPont ($9.4)

Verizon ($66.4)

Lucent Technologies ($0.4)

$ billions

Company 2005 Shareholder’s Equity

Pension Expense/(Income) and Contributions

(20,000)

(10,000)

-

10,000

20,000

30,000

40,000

50,000

60,000

2000 2001 2002 2003 2004 2005

$ millions

Employer Contributions Pension Expense/(Income)

Though Hedge Growth Continues, FoHF Growth May Moderate

Source: HFR, Grail Partners estimates.

� Total HF industry assets have grown at a CAGR of nearly 20% since 1998

� FoHF AUM year-over-year growth has dropped dramatically, and is expected to continue to decline

Hedge Funds

Hedge and FoHF AUM

$2,500

$2,175

$1,880

$1,655

$1,445

$1,230

$973$820

$622$536

$488$456$375

-$500

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E 2008E 2009E 2010E

($ billions)

-20%

0%

20%

40%

60%

80%

100%

120%

Year-over-Year FoHF Growth

FoHF AUM HF AUM (excl. FoHF) FoHF YoY Growth

…as Institutional Hedge Allocations Go Direct and Multi-Strat

Source: Grail Partners

� Also, we expect the most sophisticated investors will go direct and

to multi-strat

� One layer of fees; no sign of abating

� Direct access, but still limited transparency

� Convergence of quantitative long only capabilities and hedge

� FoHFs will intermediate investments in esoteric or niche hedge

funds

Hedge Funds

Pension Allocations to Hedge

150 170 180 190 200 200

110

160200

230300

400

40

70

110

170

250

350

$300

$400

$490

$590

$750

$950

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

2005E 2006E 2007E 2008E 2009E 2010E

($ billions)

FoHF Direct Multi-Strategy

Convergence

Index / Structured Products

Hedge Funds

Mutual Funds Traditional Asset Management

Exchange Traded Funds (ETFs)

Hedge Funds

Discounters wer

Investment & Commercial Bankers; Traditional Brokers

Private Equity / Debt

Synthetic Products

Source: The Carlyle Group.

Working Out How Best to Integrate Hedge Funds

Assist with asset allocation

Alternate Routes

Hedge Funds

Recommend manager mix

Manager visits with client

Recommend strategy mix

Deployment of Invesment

Assist choose hedge fund portfolio benchmark

Specify hedge fund portfolio objective

Review portfolio from risk perspective

Understand overall investment context

Understand overall investment objective

Iterative Process

Hedge Fund Performance Estimates


Hedge Funds � During the bear market, Hedge Funds were able to preserve capital

� In recent years, Hedge Fund returns have had difficulty outperforming the S&P 500

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

Apr-95 Apr-96 Apr-97 Apr-98 Apr-99 Apr-00 Apr-01 Apr-02 Apr-03 Apr-04 Apr-05 Apr-06

Rolling Twelve Month Returns (%)

Hedge Fund Index of Indices S&P 500

Volatility


Hedge Funds

0

5

10

15

20

25

30

35

40

45

50

Apr-95 Apr-96 Apr-97 Apr-98 Apr-99 Apr-00 Apr-01 Apr-02 Apr-03 Apr-04 Apr-05 Apr-06

VIX Monthly Closing Price

� The environment is becoming increasingly difficult, with lower volatility and increasing competition

� Is alpha being arbitraged away?

Select Hedge Transactions


Acquired

Date Target Acquirer AUM ($mm) Type

1/06 International Asset Management ABN AMRO Holding NV $2,600 FoHF

2/06 NewFinance Capital LLP Schroders 2,500 FoHF

3/06 Liberty Ermitage Jersey Limited MBO 2,409 FoHF

4/06 PMA Capital Management SPARX 2,100 FoHF

2/06 Capital Management Advisors EFG International 1,606 FoHF

4/06 HFA Holdings IPO 1,582 FoHF

3/06 Absolute Capital Management IPO 1,085 HF

1/06 Austin Capital Management Victory Capital Management 900 FoHF

4/06 Fortune Group Close Brothers 800 FoHF

Acquired


9/05 Global Asset Management Julius Baer $53,672 FoHF

6/05 Permal Group SCA (80%) Legg Mason 20,000 FoHF

11/04 AQR Capital Management (20%) Affiliated Managers Group, Inc. 12,231 HF

6/04 Deerfield & Company LLC (64%) Triarc Companies, Inc. 8,041 HF

5/04 Numeric Investors L.P. (48%) TA Associates 7,500 HF

9/04 Highbridge Capital Management J.P. Morgan & Co. 7,300 HF

8/05 Coast Asset Management (33%) Summit Partners 5,500 FoHF

6/04 Evaluation Associates Capital Markets Mellon Financial Corporation 4,548 FoHF

11/04 Fauchier Partners BNP Paribas Asset Management 3,500 FoHF

12/05 Guggenheim Alternative Asset Management (71.5%) Bank of Ireland 3,200 FoHF

Since YE 2002

YTD 2006

Hedge Funds� Strategic considerations often thwarted by pricing challenges: pricing disconnects often reflective of broader issues

Money Management M&A: Recent Past, Present, Future

Present and Near Future – Why the M&A Boom?

Recent Past – Why the M&A Lull?

� Many retail conglomerates need to be undone

� Institutional needs to be in the right capital structure in a period of significant change and challenge

� Alternatives are a huge opportunity for banks and other buyers

� New people in the boardroom of buyers

� Sellers have choices and incentives to act

� Capital is plentiful and business margins are good, but the real challenges are real so risks can be shifted

� Too much regulatory risk – in retail

� Too much market share rotation –in institutional

� Too much novelty in alternatives

� Too much boardroom transition at buyers

� Too much bipolar disease at sellers

� UNCERTAINTY and CERTAINTY are both enemies of M&A

M&A and Pricing Trends

Money Management M&A Activity

Source: SNL Financial, Company Reports, Grail Partners LLC


20 Largest Transactions Since YE 2002Acquired


2/06 Merrill Lynch Investment Managers BlackRock Inc. $539,000 Div

6/05 Citigroup AM Legg Mason 437,000 Div

5/05 Nextra Investment Management (65%) Credit Agricole 126,126 MuFu

3/05 Nuveen Investments Secondary IPO 118,505 MuFu

7/04 F&C Group ISIS Asset Management plc 104,104 Inst

9/05 SBC Wealth Management & GAM Julius Baer 96,772 PvtCl

7/05 Deutsche AM (London & Philly Ops) Aberdeen Asset Management plc 81,270 Inst

6/03 Threadneedle Asset Management American Express 74,844 Div

10/04 Nikko Asset Management (38%)Warburg Pincus, the Government of Singapore Investment

Corp. (GIC) and Nikko Principal Investments65,000 Inst

7/03 Neuberger Berman Inc. Lehman Brothers Holding Inc. 63,700 Div

4/06 Piper Jaffray Private Client Business UBS AG 52,000 PvtCl

8/04 State Street Research BlackRock Inc. 52,000 Inst

9/05 WestAM (less Brightwater) (50%) Mellon Financial Corporation 48,516 Inst

7/04 Pareto Partners (70%) Mellon Financial Corporation 38,000 Inst

11/04 Baring Asset Management MassMutual Financial Group 34,840 Inst

5/04 Strong Financial Corp. Wells Fargo & Co. 34,000 MuFu

10/04 Calamos Asset Management IPO 32,300 MuFu

11/05 New Star Asset Management IPO 26,900 MuFu

4/05 First Asset Management Affiliated Managers Group, Inc. 23,800 Inst

4/05 Daehan Investment and Securities Hana Bank 21,300 Inst

6.0 x

8.0 x

10.0 x

12.0 x

14.0 x

16.0 x

Q1 '93 Q2 '94 Q3 '95 Q4 '96 Q1 '98 Q2 '99 Q3 '00 Q4 '01 Q1 '03 Q2 '04 Q3 '05Enterprise Value as a Multiple of Run Rate EBITDA Diversified Managers Mutual Fund Managers All Managers

Mutual Fund Managers: Calamos, Eaton Vance Corporation, Federated Investors, Inc., Franklin Resources, Inc., Gabelli Asset

Management Inc., Hennessy Advisors, Janus Capital Group Inc., Nuveen Investments , Oppenheimer, Pilgrim America Capital Corp.,

Pioneer, T. Rowe Price Associates, Inc., US Global Investors, Waddell & Reed Financial, Inc.

Diversified Fund Managers: Affiliated Managers Group, Inc., Alliance Capital Management L.P., AMVESCAP PLC, BKF Capital Group,

Inc., BlackRock, Inc., Cohen & Steers, Conning Corporation, Diamond Hill Investment Group, Legg Mason, Neuberger Berman, Nvest,

Phoenix, PIMCO, Tremont, UAM, US Trust, W. P. Stewart, Westwood Holdings Group

� Since the beginning of 2003 publicly traded multiples have skyrocketed

Public Manager Going Concern Value to Run Rate EBITDA Multiples

Public vs. Private EBITDA Multiples: A 12-year Perspective

Source: Grail Partners LLC and public sources.

14.4 x

13.1 x

12.8 x


Pure Play Premium? $3 billion for Legg Mason

Source: Bloomberg, Grail Partners LLC

1Jan. 1 through June 23, 2005; June 24 through Dec. 30, 2005; Jan. 1 through Mar. 31 2006.

LM Daily CloseM&A and Pricing Trends

FQ'051

Avg Price: $129.30

Jul - Dec1

Avg Price: $111.29

Jan - Jun1

Avg Price: $78.38

$0

$20

$40

$60

$80

$100

$120

$140

$160

Jan-05 Feb-05 Mar-05 May-05 Jun-05 Aug-05 Sep-05 Nov-05 Nov-05 Jan-06 Feb-06 Apr-06

Share Price

Legg Mason sells brokerage,

acquires Citigroup Asset

Management and Permal, end

June

Pure Play Premium?

Source: Bloomberg, Grail Partners LLC

1Dec. 1, 2005 through Feb. 10, 2006; Feb. 13 through May 8, 2006

BLK Daily CloseM&A and Pricing Trends

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06

Daily Closing Price ($)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Daily Trading Volume (millio

ns)

Daily Trading Volume Closing Price

2/15: Announced

merger with MLIM

2/13: Rumors

surface

Feb - May1 Avg Price: $143.49

Dec - Feb1 Avg Price: $116.65

AUM Transacted, by Type of Target

� In aggregate, mutual fund and diversified asset managers represent the majority of all deal activity, as measured by assets transacted.


Aggregate Assets Under Management Transacted by Seller Type

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 YTD

2006

Total Estimated AUM Acquired (US$ BN)

Institutional / Private Client / Wrap (AUM) Mutual Fund / Diversified (AUM)

103

43

151

156

140

111

88

92

76

83

98

98


AUM Acquired and Number of Transactions

� Grail Partners estimates a flurry of asset management M&A activity in the coming years


Historical and Forecasted Assets Under Management Acquired and Number of Transactions

232

246

185

141

81 82 7892

8295

97112

141

156150

188

$0

$500

$1,000

$1,500

$2,000

$2,500

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006E

2007E

2008E

2009E

2010E

Total Estimated AUM Acquired (US$ BN)

0

50

100

150

200

250

300

350

Number of Transactions

Total AUM Announced Number of Transactions Announced

Grail Partners Estimates


AUM Acquired, by Type of Acquirer

� Pure play asset managers have accounted for almost all of the AUM transacted during 2005 and YTD 2006. This is the primary reason deal value is so low relative to AUM transacted.


Historical and Forecasted Aggregate Assets Under Management Acquired by Buyer Type

$0

$500

$1,000

$1,500

$2,000

$2,500

1998 1999 2000 2001 2002 2003 2004 2005 2006E 2007E 2008E 2009E 2010E

Acquired AUM (US$ BN)

Asset Manager Broker Dealer Insurance Company Bank or Trust Other

Grail Partners Estimates


Aggregate Deal Value: Transatlantic Transactions

� In-market transactions have dominated since 2002


Aggregate Deal Value by Buyer Location

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

1997 1998 1999 2000 2001 2002 2003 2004 2005 YTD

2006

Total Estimated Deal Value (US$ MM)

North American Buyer In Europe European Buyer in North America

"Local" Buyer Other Cross-Continental


$103

$159$137

$249 $307

$668

$146

$216

$473

$286

$110

$221

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 YTD

2006

Total Announced Value (US$ MM)

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

Average Deal Size (US$ MM)

Institutional / Private Client / Wrap Mutual Fund / Diversified Average Deal Size Value

88

111

140

156

103

151

99

43

83

76

92

98

Aggregate Deal Value of Global Asset Management Transactions by Seller Type

Aggregate Deal Value: US Transactions

� Average deal size has risen due to mega transactions—Legg/Citi, Julius Baer/SBC Wealth & GAM and BlackRock/MLIM.



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