What's going on?

Australian investment bank Macquarie announced it was treating itself to the acquisition of US investment management firm Waddell & Reed Financial on Thursday � and it�s not the only one splurging this holiday season�

What does this mean?

The $2 billion purchase will catapult Macquarie�s investment management business into the US�s top 25 mutual fund managers based on the $465 billion it�ll look after. And to earn that privilege, Macquarie�s paying almost 50% more for each share of Waddell & Reed than they were worth at the start of the week.


There must be something going round, because private equity-focused investment firms Dyal Capital Partners and Owl Rock Capital Partners are discussing their own merger � not just between the two of them, but with a special-purpose acquisition vehicle (SPAC) too. That would automatically list the combined company � which would look after almost $50 billion � on the stock market, as well as give it a valuation of about $13 billion.

Why should I care?

Zooming in: Ctrl, alternative, delete.

Investors have increasingly been pulling their cash out of pricey and underperforming �active� funds in favor of low-cost �passive� funds that don�t require much tinkering. That�s come as a blow to investment managers, which can�t charge as much if there�s less for them to do. Those that specialize in alternative funds, meanwhile, are probably better off: risky investments like private equity funds currently offer better returns than your garden-variety stock and bonds.

The bigger picture: Mo� mergers, mo� money.

The reason for this spate of deals in the investment management industry is pretty straightforward: the more money an investment manager looks after, the more profitable it should be. That�s because more so-called �assets under management� means more fees, even as costs � like analysts and technology � stay put. That extra profit should, Macquarie and the newly formed Dyal-Owl Rock hope, help them get bigger, faster � and boost their values.