Affiliated Managers Group, Inc. is poised to buy an ESG-focused asset manager.

Jerome L. "Jerry" Dodson Parnassus Investments Founder, Chairman

Today Jay Horgen, president and CEO of AMG, confirms that the West Palm Beach, Florida-based firm has agreed to buy a majority stake in San Francisco-based Parnassus Investments [profile]. Yet the Parnassus partners will still own a "substantial portion" of the boutique and will run the firm's operations day-to-day, according to the AMG team.

As part of the deal, retired Parnassus founder Jerry Dodson and his family will no longer hold stakes in the company. (Dodson stepped back from the firm last year after founding it in 1984. He remains chairman.) Meanwhile, Ben Allen, PM and CEO of Parnassus, and Todd Ahlsten, chief investment officer and PM, are both entering into long-term employment deals.

Dan Fannon, an analyst at Jefferies who follows AMG, says that the price tag on the deal is about $490 million, which translates into about 1 percent of Parnassus' roughly $47 billion in AUM (as of June 30). Yet since the precise size of AMG's expected stake has not yet been disclosed, the precise valuation is not clear: the valuation of the whole of Parnassus could be as high as nearly $1 billion, translating roughly 2 percent of its AUM. "The deal will likely be funded through a combination of cash and debt," Fannon predicts.

Moelis & Company LLC advised Parnassus on the deal, which is expected to close later this year.

Horgen lauds the Parnassus team's "multi-decade work in sustainable investing" and notes that Parnassus will be AMG's "third affiliate wholly dedicated to responsible and impact investing." Indeed, the AMG team expects the deal to more than double AMG's "ESG-dedicated AUM" to about $80 billion. (By comparison, AMG's aggregate AUM as of March 31 was about $738 billion.) They claim that Parnassus is the biggest ESG-dedicated fund firm in the country.

"Having known the senior partners for more than a decade, AMG has developed a unique relationship with this team and closely followed the evolution of their business," Horgen states. "When the time was right for Parnassus to choose a permanent partner and complete the first generational transition in the firm's long-term succession plan, the team chose AMG."

On the Parnassus side, Allen describes the deal as providing "long-term certainty" for Parnassus' clients.

"Todd Ahlsten and I have committed to provide leadership to our firm for many years to come, and other members of the partnership group will be aligned with the long-term interests of our investors, and AMG, through equity ownership in Parnassus," Allen states. "With this new partnership, we are well-positioned to build an enduring, multi-generational, partner-owned investment firm that serves the sustainable investing needs of our clients."

"I am proud of Parnassus' seasoned leadership team and very pleased that the company we built will live on to serve generations of clients to come," Dodson states. 

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