Press release directly from Hillcrest:
We are pleased to announce that Hillcrest Asset Management have been hired by American Beacon Funds and American Beacon Advisors, Inc. to manage a $250 million Small Cap Value portfolio as part of the American Beacon Small Cap Value multi-manager fund.
The ICI has written a paper on the orderly resolution of mutual funds and has quoted Grail Partners managing partner Darlene DeRemer as an expert on the subject, citing "Grail Partners LLC Current and Future State of the Asset Management Industry and Implications on Fund Manager Merger and Acquisitions" (June 2014).
Read the ICI's full paper on orderly resolution here
See the SEC comment letter (July 15, 2014)
Author: James Comtois
Source: Pensions & Investments
Russell Investments' asset management and consulting businesses will most likely be sold by the London Stock Exchange Group PLC, which is purchasing the entire firm for $2.7 billion, sources say.
The price tag for those business lines could be between $700 million and $1 billion, the sources estimate.
Sources suggest that State Street Corp., Boston; Vanguard Group Inc., Malvern, Pa.; Legal & General Group PLC, London; and SEI Investments Co., London, would be possible bidders.
Most agree Russell's indexing arm is the plum sought by the LSE Group. Russell first introduced its indexes in 1984. The firm, which was originally formed in 1936, began investment consulting in 1969 and managing money in 1980. Russell, Seattle, is owned by Northwestern Mutual Life Insurance Co., which bought the firm in 1999.
“Without a doubt, the legacy business will be spun out of the London Stock Exchange,” said Donald Putnam, a San Francisco-based managing partner of investment bank Grail Partners. “They had to buy the bath water with the baby. They had to do a single deal and separate the companies later.”
Mr. Putnam said Russell's core money management and consulting businesses are “not compatible with the indexing business,” because the primary purpose of an exchange is to have a “neutral venue for transacting.”
Jeffrey MacLean, Los Angeles-based CEO at Wurts & Associates, agreed: “The people I've talked to think that the stock exchange won't have any use for the asset management and consultant divisions.”
Mr. Putnam also said he believed the two businesses would be sold as a single unit and could fetch up to $1 billion.
Who is most likely to step up for the sale and what will they do with the businesses? “Those are difficult questions that I don't know the answer to,” Mr. MacLean said. “There's speculation as to whether the asset management and consultant divisions will be spun off as one unit or sold in pieces.”
LSE spokesman Tom Gilbert said the stock exchange group will conduct a review of Russell's $256 billion investment management and consulting divisions to see how they fit with the overall organization. That review is expected after the deal's completion at the end of 2014 or beginning of 2015. He declined to provide additional details.
Russell spokesman Tim Benedict referred inquiries to the LSE.
Limited information
“Right now there's very limited information out. But if there was a sale announced, it wouldn't surprise me at all,” said Peter K. Lenardos, an analyst at RBC Capital Markets LLC's London office, who covers diversified financials in its global equity division.
“The London Stock Exchange has carved out a reputation for being a best-in-class operator in the niche that they're in, and I don't know if asset management is where their skill set lies,” Mr. Lenardos added.
A June 26 report co-authored by Mr. Lenardos said the Russell acquisition will enable the exchange “to compete more effectively with (global index provider) MSCI, will improve liquidity in LSEG's shares and will provide more recurring revenue that is typically assigned a higher multiple by the market.”
“The London Stock Exchange now owns a big asset management firm,” said Fernand Schoppig, president of the money management consulting firm FS Associates, Inc., West Orange, N.J. “It's very likely that they'll sell off the assets and keep the indexes.”
Some of Russell's institutional clients did not express much concern over any impending change.
“We've had a great working relationship with Russell for over 20 years. Throughout the sale process we will continue to maintain our confidence in Russell and relationship with them. They have a great culture and talented people,” said Osey “Skip” McGee Jr., executive director of Baton Rouge-based Louisiana Sheriffs' Pension & Relief Fund.
The $2.7 billion pension fund has hired Russell for investment consulting, money management and transition management services.
Scott Simon, chief investment officer of the $4.1 billion Colorado Fire & Police Pension Association, Greenwood Village, said staff members aren't terribly concerned. “We use them for a specific mandate (cash overlay), and we don't see this transaction affecting their services for that group,” Mr. Simon said. “We see no cause for concern.”
Charles Wollmann, spokesman for the $19 billion New Mexico State Investment Council, Santa Fe, said in an e-mail that the council “will monitor this transaction and evaluate it for potential impact on the services” that Russell provides.
Russell is one of five transition managers New Mexico has on its bench.
Opportunity for competitors
In terms of what a possible sale of Russell's divisions could mean to a competitor like Wurts, Mr. MacLean said: “There are a lot of talented people at Russell, and we've been fortunate to have hired some of them. Our close proximity to Russell in Seattle is a potential opportunity for us.”
Upon completion of the deal, Russell Investments President and CEO Len Brennan will join the exchange's executive committee. It remains to be seen, however, what Mr. Brennan will do if and when the investment division is sold.
“The Russell brand has a good reputation in the industry,” noted Mr. Schoppig.
“The really interesting question is how and when and by what process do they spin off this business,” said Grail's Mr. Putnam.
Mr. Lenardos noted that following the review, the next step for LSEG to take, should it choose to sell the business, “would be to test the market price for this asset. The only way to do that is to engage potential buyers.”
Article published on May 29, 2014
By Danielle Verbrigghe
Source: FundFire
The largest of the so called ‘RIA aggregator’ shops, Focus Financial Partners, has set an aggressive acquisition pace so far this year, driven in part by a ramp-up in resources within its wirehouse lift-out program.
In fact, the fast-growing firm appears to be on track to outpace last year’s acquisition growth. So far this year, the RIA aggregator has completed 13 transactions, adding more than $4 billion in client assets. That compares with 10 such deals in 2013, which collectively added more than $5 billion in client assets.
The firm has benefited from an increase in resources behind its Focus Connections program, which targets wirehouse teams looking to transition to independence, says Rudy Adolf, Focus Financial Partners’ founder and CEO.
“We have invested more in this area because we think it is very, very attractive,” says Adolf. “It’s a terrific channel, first and foremost, because it is such a compelling value proposition. There’s such a big benefit for a client to move with an advisor towards independence.”
Over the past year and a half, Focus, which represents about $75 billion in overall client assets across about 30 partner firms, has ramped up resources behind the Connections program, including adding personnel and raising capital to fund transactions. This year, six of its 13 deals have gone through the program.
But wirehouse lift-outs are only one piece of the transaction mix. The firm also invests in large RIA firms, targeting those with at least $400 to $500 million in client assets. Those shops usually join as stand-alone partner firms. Through its merger program, Focus provides capital and transition support to help existing partner firms acquire advisors, targeting shops with between $100 million and $400 million in client assets. Additionally, Focus offers a succession program targeting smaller deals.
While Adolf expects to see growth coming from all of these channels, he expects to see particularly strong growth from the Connections program, as more wirehouse teams break away.
“We’re on a very good trajectory,” Adolf says. “Focus has a very large war chest in terms of capital we can deploy.”
An example of one such recent deal came earlier this month, when Focus announced that a team of former Merrill Lynch advisors with more than $750 million in client assets, had launched a new RIA, Quadrant Private Wealth. Working with the Focus Connections program, Herman Rij, Jason Cort, Kori Lannon and Brian Cort left Merrill to form the new Bethlehem, Penn.-based firm.
And earlier this week Focus announced that former Wells Fargo advisors Joseph Zappia and Ted Garofola had joined one of Focus’s existing RIA partner firms, LVW Advisors. Zappia, who will lead a new family office unit at LVW, had previously been a managing director and senior portfolio manager with the Zappia Investment Group at Wells Fargo Advisors, where he managed about $400 million in private client assets.
Lori Van Dusen, CEO of LVW Advisors, originally established the firm by linking with Focus in 2011. Before that, she had been with with Convergent Wealth Advisors, after earlier departing Smith Barney. Her choice to ultimately pick Focus was driven by her desire not only to grow organically, but to also make acquisitions.
“I decided it would be the most powerful combination to have an independent business backed by the resources of Focus and a lot of cheap capital,” Van Dusen says.
Now, her firm represents about $5 billion in overall client assets, including about $2.5 billion in assets under management.
When acquiring an advisor shop, Focus typically takes between a 40% and 60% stake. While the firm provides transitional and operational support, the RIAs continue to function as independent shops. While Focus doesn’t create its own portfolios or recommend investments, it does offer partner firms access to third-party research from providers including Mercer, CAIS, Fund Evaluation Group, Goldman Sachs, eVestment and Zephyr. Each partner firm ultimately makes its own investment selections.
“The core of our formula is you never turn a successful entrepreneur into an employee,” Adolf says. “We have a very decentralized business model.”
Breakaway advisors are often drawn toward linking up with firms that represent a mix of independence and assistance, says Dan Inveen, principal and director of research of FA Insight.
“There are a lot of different flavors that a transitioning breakaway can choose for their affiliation model,” Inveen says. Though the business models vary, firms like United Capital and HighTower also target such advisors. Firms that can build adequate scale and resources specifically supporting breakaway advisors may stand to benefit over those that are just dabblers, Inveen says.
“If you specialize in understanding the needs and challenges of these folks you can become very good at it and prosper as a result,” Inveen says.
Focus has set the pace for other firms trying to build mega-RIA networks, says S. Craig Cognetti, a partner with Grail Partners.
“Their success has actually attracted a lot of people to try to do this,” Cognetti says. “While it seems simple, it’s actually a lot harder to do what they’re doing.”
Focus has an advantage in being well financed, and having a track record of growth through acquisitions, says FA Insight’s Inveen.
“Focus is one of few firms that has demonstrated some staying power,” Inveen says. “The fact that there’s not a lot of other Focus Financials out there indicates that this is not an easy business model to succeed at.”
From Business Wire:
Victory Capital Management Inc. and Munder Capital Management (“Munder”) announced today that Victory’s parent company, Victory Capital Holdings, Inc. (“Victory”), has entered into a purchase agreement to acquire Munder, including its wholly owned subsidiary, Integrity Asset Management, LLC (“Integrity”). The all-cash purchase will form a new independent investment advisory firm headquartered in Cleveland, Ohio. The transaction combines two strong Midwest-based investment management firms with multi-boutique business models, each recognized for its investment-centric culture. Financial terms were not disclosed.
“Victory and Munder are a natural fit culturally and from a business model perspective”
The combination will result in an investment management firm with over $37 billion of assets under management and a diversified lineup of investment offerings. The firm’s investment teams' underlying investment processes and decision-making will not change nor will their independence, and they will continue to employ the same disciplined investment approaches and utilize the same rigorous investment and risk management processes that have served as the foundation of their strategies.
“Victory and Munder are a natural fit culturally and from a business model perspective,” said David Brown, Chairman and Chief Executive Officer of Victory. “Both organizations value the same approach, with autonomous, chief investment officer-led investment teams that manage client assets in their own unique styles. Munder has four world-class investment teams that have excelled under this structure and we are excited to help them continue their growth going forward. By joining forces, we create an investment management firm that is even better positioned to achieve our clients’ goals and objectives for the long term.”
“The scale that results from forming the new company will allow our portfolio managers to continue having access to best-in-class resources and support to maintain their singular focus on money management,” said Tony Dong, Munder’s Vice Chairman, Chief Investment Officer and Lead Manager of Munder’s mid-cap investment team. “We will remain strongly aligned with our clients, focused on producing strong risk-adjusted returns and an attentive level of service. The new enterprise will provide a diversified platform of investment solutions that will allow us to continue to serve our clients. We share in the excitement to be part of this new company and believe our clients will readily appreciate the value and opportunity as well.”
Both firms’ shared commitment to an investment-centric culture will be maintained and highlighted at the new company, as will a continued commitment to delivering exceptional client service. These attributes will be the foundation on which the new company will operate.
Daniel Bandi, Chief Investment Officer of Integrity, said: “Integrity was founded on the principle of providing consistent, superior performance fostered by a culture that is both independent and client-centric. This opportunity will allow us to continue delivering strong performance for our clients today in the same environment and, more importantly, in the future.”
Senior executives and investment management personnel from Victory, Munder and Integrity will be significant investors in the new entity. This investment underscores and reflects their commitment and confidence in the new company and furthers the alignment of interests with current and future clients.
Additional equity financing for the new company will be led by funds managed by Crestview Partners and Reverence Capital Partners whose investors include U.S. and International institutional and high net worth investors. Each will make a significant investment in the new company.
Upon completion of the transaction, Victory’s David Brown will be appointed as Chairman and CEO of the new company and Christopher Ohmacht, current President of Victory, will serve as President. Jim FitzGerald, current President of Munder, will become Vice Chairman. The new company's board of directors will be management-led, with Mr. Brown as its Chairman and Mr. Ohmacht as an employee director. Other board appointments will be made and announced at a later date, as will the name of the new holding company. Victory, Munder and Integrity investment teams and other personnel will continue to operate from their respective locations in Cleveland, OH; Birmingham, MI; Cincinnati, OH; New York, NY; Boston, MA; Denver, CO; Tampa, FL; and Rocky River, OH.
The transaction, which is expected to close by the end of the third quarter of 2014, is subject to customary closing conditions and consents, including the consent of certain Munder-advised mutual funds and other Munder investment advisory clients.
Morgan Stanley & Co. LLC provided financial advice and Willkie Farr & Gallagher LLP provided legal advice to Victory. Munder was advised by Goldman, Sachs & Co., Sandler O’Neill & Partners, L.P. and Davis Polk & Wardwell LLP. Reverence Capital Partners was advised by Evercore Group LLC and Wachtell, Lipton, Rosen & Katz.
ABOUT VICTORY CAPITAL MANAGEMENT
Victory Capital Management is headquartered in Cleveland, Ohio with offices in New York, Cincinnati, Denver and Tampa. As of March 31, 2014, Victory had $18.6 billion in assets under management and advisement with 140 employees.
The firm provides investment advisory services to institutional clients including corporations, non-profits, public funds, Taft-Hartley and sub-advisory clients. Victory offers international and domestic equity and domestic fixed income products to these investors through separate accounts and commingled funds. Institutional assets under management at March 31, 2014 totaled $10.8 billion.
Victory is the investment advisor to The Victory Funds, a collection of 18 mutual funds, offering a variety of share classes. The firm also offers retail and retirement clients separately managed accounts through wrap fee programs and access to its investment models through unified managed accounts. Victory had $7.8 billion in retail assets under management and advisement as of March 31, 2014.
ABOUT MUNDER CAPITAL MANAGEMENT
Munder Capital Management is an institutional investment management firm providing highly disciplined domestic and international equity, as well as fixed income investment solutions. Together with its Integrity Asset Management affiliate, more than $18.4 billion of investment assets (as of March 31, 2014) are managed on behalf of corporations, retirement plans, insurance companies, municipalities, Taft-Hartley and mutual fund investors. Munder offers products across various asset classes that span the risk and capitalization spectrums in multiple markets through separate accounts, commingled funds and mutual funds. Based in Birmingham, MI with an office in Boston, Munder is an independently owned firm and its employees represent a significant percentage of ownership, contributing to its client-centric culture.
ABOUT INTEGRITY ASSET MANAGEMENT
Integrity Asset Management is a Rocky River, OH-based investment advisory firm specializing in managing value-oriented equity strategies, primarily for institutional clients. Established in 2003, the firm manages over $4.5 billion of assets as of March 31, 2014 for a diverse group of corporate, public, endowment, foundation and Taft-Hartley clients.
ABOUT CRESTVIEW PARTNERS
Founded in 2004, Crestview Partners is a private equity firm with a value orientation focused on the middle market. The firm’s partners have complementary experience and distinguished backgrounds in private equity, finance, operations and management. Crestview has deep experience in its focus sectors – financial services, media, energy and healthcare.
ABOUT REVERENCE CAPITAL PARTNERS
Reverence was founded in 2013, by Milton Berlinski, who is the Managing Partner, along with Peter Aberg and Alexander Chulack. Reverence Capital Partners LLC is a private investment firm focused on opportunities in financial services. The firm’s partners bring over 85 years of experience in financial services.
Contacts
STARKMAN
Eric Starkman, 212-624-9755
erics@starkmanpr.com
or
Jackie Condie, 212-370-7187
jcondie@starkmanpr.com
