Reports from Bloomberg highlight how the proposed $30 billion merger of insurance brokerage giants Aon and Willis Towers Watson (WTW) would create the world’s largest outsourced investment management firm.
Some critics of the proposed deal have warned that the combined entity would dominate outsourced investment services, noting concerns that the large companies taking over outsourced responsibilities are too big to effectively manage individual sectors, while employers are too small to properly keep those firms in check.
According to Bloomberg, Aon and WTW are global leaders in the emerging market for outsourced Chief Investment Officers (OCIOs), which is an expanding segment of the retirement money manager market.
By merging, the combined company would overtake Marsh McLennan’s Mercer unit to establish the world’s largest OCIO provider, with 10% control of that market and $300 billion of assets under management, says Bloomberg, citing industry estimates.
Recently, outsourcing has grown in popularity as employers look for ways to offload fiduciary responsibilities for things like retirement benefit plans. As explained by Bloomberg, OCIOs can do business for nonprofit trusts and health-care systems alongside other traditional institutional investors.
Within the U.S. Department of Justice’s (DoJ) civil antitrust lawsuit, which it filed last week in an effort to try to block the Aon / WTW transaction, actuarial service businesses for large, single-employer traditional pension plans were noted as anticompetitive aspects of the deal.
“The proposed Merger would eliminate competition between Aon and WTW and leave these plans with few competitive options,” said the DoJ.
Of course, Aon has agreed to sell its US retirement business to Aquiline and its Retiree Health Exchange business to Alight as it looked to appease the DoJ, but did retain its OCIO and non-discretionary asset management businesses.
In a follow-up article, Bloomberg notes how the DoJ’s suit to block the deal raises the question of whether servicing large, multinational firms for their risk transfer needs is a market distinct enough to warrant antitrust protection.