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Nippon Life to buy 25% of US asset manager TCW from Carlyle

[TOKYO] Nippon Life Insurance Co, Japan's biggest private sector life insurer, has agreed to buy 24.75 per cent of US investment firm TCW Group from US asset manager Carlyle Group LP, the three companies said on Friday.

The three did not disclose terms of the deal in a joint statement, but a person with direct knowledge of the matter said the insurer will pay about 55 billion yen (S$660.62 million). Nippon Life declined to comment on price when contacted by Reuters.

The deal is part of broader push by Nippon Life and other Japanese financial institutions to build scale in asset management, which they see as a promising growth-driver amid persistently low interest rates and stricter capital regulations at home.

In the statement, Nippon Life said the transaction is scheduled to close by the end of this month, pending regulatory approval.

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Headquartered in Los Angeles, TCW provides products in fixed income, equities, emerging markets and alternative investments. It had US$191.6 billion in assets under management as of the end of 2016, with a little over 80 per cent in US bonds.

Well-known bond fund manager Jeffrey Gundlach was a former TCW employee before setting up rival DoubleLine Capital LP.

After Nippon Life's investment, Carlyle will retain 31.2 per cent of TCW, whose management and staff will hold 44.1 per cent. Nippon Life said it will have two board seats.

Japanese insurers and banks have been expressing interest in buying overseas asset managers. Mitsubishi UFJ Financial Group Inc has said it is ready to spend up to one trillion yen in acquisitions.

Yet many officials at Japanese companies acknowledge difficulties in asset management deals, with retention of fund managers the biggest challenge after ownership change.

"It's risky to buy asset management companies outright. What happens if fund managers leave after acquiring control," said a president of a major banking group, who declined to be identified.

"We'd be best starting with a minority stake and building it up after we gain the trust of key staff," the executive said.