Commonwealth Bank of Australia (ASX: CBA) continues to explore opportunities for its Colonial First State Global Asset Management business, one of Australia's largest fund managers.
Commbank has been considering divesting a number of businesses in order to simplify its operations, and recently sold its Australian and New Zealand life insurance division (though it retains a 20 year contract to sell life insurance products on behalf of the new owner, AIA Insurance).
Colonial First State Global Asset Management (CFSGAM) could be the next cab off the rank, with several media outlets reporting that the business is moving closer to an initial public offering (IPO) process.
With $219 billion in funds under management (FUM), CFSGAM is one of Australia's largest fund managers. It generated $837 million in income in 2017 and would almost certainly be one of the largest IPOs of 2018. Spinoff IPOs are commonly recognised as more attractive than other types such as private equity IPOs, and past spinoffs such as South32 Ltd (ASX: S32) and Orora Ltd (ASX: ORA) have done quite well, outperforming the market since listing.
Spinoffs usually benefit from a more focused operation than larger businesses, as once they are freed from the bureaucracy of a large corporation they can typically cut costs and compete more effectively. At the moment, CFSGAM is simply a small part of a very large company; when it stands on its own its performance may improve. Either way, the Colonial First State Global Asset Management is shaping up as one of 2018's biggest events; we'll have more coverage if the IPO progresses.
