Liontrust to acquire GAM Holding AG

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Liontrust announces that it has conditionally agreed to acquire the entire issued share capital of GAM Holding AG (GAM), a global investment management firm with GAM’s Investment Management division having AUMA of CHF 23.3 billion (£20.9 billion) as at 31 March 2023.

The Proposed Acquisition of GAM will accelerate Liontrust’s strategic progress and growth through the broader investment capability and global distribution of the enlarged company, according the firm press release.

Liontrust will provide an environment to enable the investment teams to focus on managing their portfolios without distractions within a strong risk and compliance framework and with the support of the rest of the business to deliver performance and a growth in assets.

The broad range of funds and asset classes will enhance Liontrust’s product range. The expanded range will offer the potential to grow the combined client base and provides Liontrust with differentiated performance across the fund range through the market cycle.

GAM’s existing product offering is complementary to Liontrust’s especially in fixed income and alternatives. GAM will strengthen Liontrust’s fixed income offering, adding capabilities in: Asset Backed securities, Emerging Markets debt, Global Credit, Global Rates, Catastrophe bonds and Insurance Linked Securities.

Equities will continue to be the largest product for the enlarged company, with GAM adding and strengthening capabilities in: Asia, Japan and Emerging Markets, Thematic Global Equities, Europe, Luxury Brands and UK Income. GAM will also expand the multi-asset and alternatives propositions and provide a capability in wealth management.

This increased product depth will be expected to support growth in Liontrust’s market share over time and enable us to better mitigate against market volatility and changing demand for investment styles. The Proposed Acquisition will lead to a step change in scale, with 12 funds having more than £1 billion of AuMA (two for Economic Advantage, one for Global Fundamental, four for Sustainable Investments, four for GAM Fixed Income and one for GAM Multi-Asset).

Liontrust intends to rebrand all GAM funds as Liontrust as soon as possible after completion of the Proposed Acquisition and for the GAM business to operate under the Liontrust brand.

The acquisition will enhance distribution globally and the opportunity to increase sales and market share. GAM is geographically diverse with 3,500 clients based in almost every continent, with 2,700 in Europe. Switzerland, Germany, Italy, the US, Iberia and Latin America are GAM’s largest markets outside the UK.

Liontrust and GAM are both focused on providing excellent client service and the enlarged company will deliver engaging experiences for investors globally.

The fund managers and other employees at GAM will benefit from the environment at Liontrust, the enhanced distribution, strong brand and marketing, and the resources of the enlarged company.

John Ions, Chief Executive of Liontrust, said: “We have been impressed by the quality of the investment teams at GAM. There is commonality in that Liontrust and GAM are both committed to independent and distinct processes for each of their investment teams. Liontrust specialises in providing an environment in which investment teams can thrive, including through the excellence of our sales and marketing and a robust business infrastructure, strong risk and compliance culture, and the stability that comes with financial strength.”

Peter Sanderson, CEO of GAM, said: “I am delighted we have agreed this transaction with Liontrust. Our distinctive approaches to investing and culture are closely aligned, and this combination represents the best opportunity for our talented team of professionals at GAM to continue to provide clients with high conviction active investment strategies. The resulting business will have a strong balance sheet, a broader array of excellent investment products, and a global distribution footprint from which to deliver growth that our shareholders can participate in the future.”

David Jacob, Chairman of GAM, said “I would like to thank all my colleagues at GAM for their hard work and dedication while we worked to determine the best option for the future of the firm.  I am confident that the loyalty of our clients will be rewarded since they will now benefit from the increased capabilities and stability of the combined firm. Our shareholders have been patient, and I and my fellow Board members are unanimous in our recommendation that they should tender their shares in response to the offer from Liontrust.”

Advisors’ Front-Office Technology Is Here to Stay

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Driven by the need to facilitate a digital work environment, advisor use of front-office technology has evolved significantly over the past three years. New research from Cerulli, State of U.S. Wealth Management Technology 2023, finds front-office technology has made a lasting impact on both client satisfaction and advisor productivity.

Between 2019 and 2022, the greatest rates of growth in advisor adoption occurred with technologies that facilitate a digital work environment, such as e-signature, client portals, and video conferencing, driven largely by the needs imposed by the pandemic. Advisors tell Cerulli that these technologies were critical to their ability to operate effectively during the pandemic, but that the benefits experienced go well beyond that. Thus, many patterns of technology use that emerged during the pandemic are likely to continue into the post-pandemic world.

The technologies that are most frequently cited as positively impacting the client experience include e-signature (77%), video conferencing (75%), and client portal (64%). Likewise, the technologies that are most frequently cited as positively impacting advisor productivity include video conferencing (75%), e-signature (73%), and CRM (70%).

“This data aligns with the many conversations Cerulli has had with financial advisors who share how e-signature technology has drastically reduced the time and effort required for clients to open accounts, and create linkages between accounts, for example, obviating the need for papering and re-papering of accounts,” says Michael Rose, associate director. The same applies to virtual meetings, which were rare prior to the pandemic, and are now often a preferred meeting option for clients and advisors. “The precipitous rise in advisors’ use of these applications over the last three years underscores the importance of creative, outside-the-box thinking when it comes to the ways in which they do business altogether,” he says.

Overall, the ways in which advisors source technology varies between affiliation models. For instance, 88% of advisor practices affiliated with captive broker/dealers (B/Ds) source their suite of technology from their home offices with relatively little control over product selection. Independent registered investment advisors (RIAs) represent the other end of the spectrum, with 50% building custom technology stacks sourced entirely from third parties.

“The diverse ways in which advisor practices source their technology are testament to the varying approaches for operating a wealth management practice in the modern day,” concludes Rose.

Morgan Stanley Capital Partners Acquires RowCal

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Investment funds managed by Morgan Stanley Capital Partners (“MSCP”), the middle-market focused private equity team at Morgan Stanley Investment Management, have acquired RowCal. MSCP is partnering with the current management team led by CEO Jake Christenson, who founded the business in 2018, the firm said in a press release.

Headquartered in Minneapolis, Minn., RowCal is a provider of outsourced homeowner association (HOA) property management services, offering a comprehensive solution to better manage and maintain HOA communities. RowCal currently serves the Minnesota, Colorado and Texas markets and has scaled rapidly through market-leading organic growth and strategic add-on acquisitions.

The company’s differentiated approach, which leverages advanced technology and an integrated care team to enhance the customer experience, has enabled RowCal to quickly emerge as a leading and trusted provider in the space since inception.

Adam Shaw, Managing Director and Head of Business Services at MSCP, said: “We are delighted to partner with Jake and the RowCal team as they continue their mission of building a leading HOA property management provider. RowCal’s impressive growth trajectory coupled with a client-focused culture are a testament to what the management team has built since its founding. We look forward to working together to advance RowCal’s vision to serve its client base and pursue continued expansion of the company through robust organic growth and M&A.”

MSCP’s acquisition of RowCal is consistent with the team’s focus on target subsectors where MSCP has deep institutional knowledge and domain expertise. It is MSCP’s third acquisition in 2023 following those of Apex Companies and Allstar Services.

“Since founding RowCal in 2018, the company has experienced strong growth through our focus on delivering a high-quality experience to HOA managers. We believe our partnership with MSCP will enable us to continue our national buildout and growth trajectory by investing in the capability set to drive organic growth and expand our geographic footprint,” said Jake Christenson, CEO of RowCal.

Debevoise & Plimpton served as legal counsel to MSCP. TD Cowen and William Blair served as financial advisors to MSCP. Robert W. Baird & Co served as financial advisor to RowCal.

The Siegel Group Enters Florida With Its Siegel Select® Extended-Stay Brand

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The Siegel Group, a real estate investment and management company, announced that it had acquired the former Stay Suites of America located in Orange Park, Florida.

The property, which suffered from deferred maintenance and management issues, was purchased in an all-cash transaction for $7 million and quickly closed in under 30 days. This acquisition increases the number of Siegel Suites® and Siegel Select® properties throughout the United States to 61 and marks the brand’s first location in the Florida market. This location is in addition to the company’s significant presence throughout Nevada, New Mexico, Arizona, Texas, Tennessee, Louisiana, Mississippi, Alabama, Ohio, Oklahoma, South Carolina, and Georgia.

The Siegel Group, which operates a sizable commercial real estate portfolio consisting of apartments, extended-stay hotels, flexible-stay apartments, hotels, retail, office, and development projects, will be operating the property under its successful Siegel Select® brand which provides the option of either short-term daily stays or longer term extended-stay accommodations.

The property, which will be renamed Siegel Select Orange Park, is located directly off Interstate 295 and in close proximity to Downtown Jacksonville. Built in 1998, the 3-story exterior corridor property totals approximately 57,060 square feet and is comprised of 144 units that are all equipped with kitchenettes. The Siegel Group will be making a number of improvements including updating flooring and cabinetry, as well as installing new furniture and appliance packages in all units. Additionally, the exterior of the property will be painted along with other cosmetic upgrades, including branding and signage that are characteristic of the Siegel Select brand.

Chigozie Amadi, Chief Financial Officer of The Siegel Group stated: “We have been looking for the right opportunity to enter the Florida market and are excited to introduce our Siegel Select brand to Orange Park. Now that we have established a presence in this new market, we plan to further expand our Siegel Select and Siegel Suites brands throughout the state.”

Dynasty Financial Partners To Launch Dynasty Investment Bank

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Dynasty Financial Partners announced the launch of Dynasty Investment Bank.

Going forward, the firm will leverage its M&A and capital strategies capabilities to offer buy-side and sell-side advice for independent wealth management firms inside and outside the Dynasty Network as well as for other types of firms that are in need of independent and objective strategic advice in the wealth and asset management industry.

“At Dynasty, we are facing substantial demand for M&A and investment banking services from advisors in our Network and outside our Network. Whether a CEO desires to acquire an RIA or tuck-in a group of advisors, want to explore selling their business, or are seeking a valuation to understand the value of their equity, RIA management teams seek high quality and objective advice. With our deep expertise and years of experience working with hundreds of leading advisors, we are well-positioned to offer RIAs a wide range of investment banking capabilities in this ever-complicated market” said Shirl Penney, CEO of Dynasty Financial Partners.

According to Harris Baltch, Head of Dynasty Investment Bank, “The independent wealth management industry has accelerated its pace of consolidation and maturation over the last decade. The headwinds of aging advisors, the valuation gap of succession and a higher interest rate combined with the influx of different capital providers and a multitude of business models will create a long runway for consolidation in the years to come. We believe this will create significant opportunity to provide independent, objective advice to CEOs, management teams and investors to execute M&A from start to finish.”

The Dynasty Investment Bank employs a team of seasoned investment bankers, former private equity professionals and other former Wall Street executives that have deep transaction experience advising founders, CEOs and other C-suite professionals on M&A, capital structure optimization and succession. The firm cumulatively has professional experience of more than 100 years and has advised on over $25 billion in transaction value across dozens of advisory mandates.

Over the last twelve months, Dynasty has advised on over 14 transactions including the recent announcement by DayMark Wealth Partner’s tuck-in of a $450 million team and Americana Partners’ tuck in of a $700 million team from major wirehouses in the United States.

Texas-Based Wealth Team Combines Forces with Dynasty Financial Partners to Launch Precedent Wealth Partners

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Harold Williams and George Williams announced that they have partnered with Dynasty Financial Partners to launch a newly independent firm called Precedent Wealth Partners.

Based in San Antonio, Texas, Precedent Wealth Partners will also introduce a unique program that enables clients to share in the success of the firm through a fee-rebate program called ‘WillShare’. They plan to open a Houston office in August.

“We launched Precedent Wealth Partners largely because we want to partner with our clients by creating an advisory entity that cannot easily be sold. We want our clients to feel they can count on our permanence and alignment with them,” said Precedent Wealth Partners’ co-founder Harold Williams. “Our WillShare program aligns the clients’ interests with that of the owners, as we plan to share 33% of our distributable after-tax net income with our clients, via fee credits every year. We don’t know of any firms out there that are doing anything like this – it’s a new precedent being established in the wealth management marketplace. We’re proud of what we’re doing, and we’re excited to get going.”

The team previously managed over $1 billion in assets at Linscomb & Williams, a Houston-based wealth management firm named to Barrons Top 100 in the most recent release.

Mr. Williams added, “We look to expand our message and grow organically rather than focus on growth through acquisition. All too often, RIAs launch and then begin a “race to sell” within the next 5-10 years, whether to private equity, a bank, or other buyers. This may not work out so well for the clients. We want to be different: we want our clients to feel they are treated like fellow-owners. Our WillShare program will foster that feeling and lay the foundation for an enduring firm which they can count on to stay committed to its principles for many years to come.”

“We welcome Harold, George and the whole Precedent Wealth Partners team to the Dynasty Network and we look forward to working with them in building out their firm,” said Shirl Penney, CEO of Dynasty Financial Partners.

The name ‘Precedent’ speaks to the firm’s passion for setting a new precedent in the field of financial advice. Precedent Wealth Partners is in the unique position of benefitting clients with a share of their after-tax profits.

Precedent Wealth Partners works with clients in the areas of investment management, wealth planning, estate planning, tax strategy, insurance/risk management, and retirement planning.

Franklin Templeton Hires Damian Zamudio to Develop Firm’s Americas Offshore Business

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Photo courtesyDamian Zamudio, Franklin Templeton

Franklin Templeton announced the hiring of Damian Zamudio, as Vice President Offshore Sales Executive, to further develop and expand its offshore business with clients in New York City and the greater Northeast.

Based in New York, Zamudio reports to Marcus Vinicius Goncalves, CFA, Head of Americas Offshore Sales.

“Damian brings two decades of wealth and asset management experience to his new role, where he will be focused on providing an exceptional client experience,” said Goncalves. “We continue to be focused on offering clients a broad range of investment opportunities and differentiated capabilities, including alternatives, short duration fixed income and income solutions, to meet their needs in this market environment.”

Zamudio previously served as Regional Sales Manager International at abrdn Plc, where he spent more than 10 years supporting all aspects of the sales and business development life cycles across the Americas offshore markets. He was also a Vice President at BlackRock, where he was responsible for sales of a wide variety of sophisticated solutions and platforms tailored for the private bank and international clients. In addition, he was an Assistant Vice President at Merrill Lynch Wealth Management, where he consulted domestic and international financial advisors.

Zamudio holds a Bachelor of Arts from San Diego State University, with a major in International Business.

 

Santander appoints Christiana Riley as regional head of North America

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Banco Santander is to appoint Christiana Riley as regional head of North America.

Ms. Riley will join the bank on 1 October, subject to regulatory approval, and will be responsible for all the bank’s businesses in the US and Mexico, with the respective country heads, Tim Wennes and Felipe García Ascencio, reporting to her.

She will be a member of the group management team and report to the group’s CEO, Héctor Grisi, who was the regional head for North America until he was appointed to his current role on 1 January 2023. 

Ms Riley joins Santander from Deutsche Bank, where she was a member of the management board having held several leadership roles over the past 17 years in both Europe and the Americas.

She was most recently regional CEO for Deutsche’s business across the Americas, based in New York, and before that she was chief financial officer and co-CEO of Corporate and Investment Banking (CIB). Prior to joining Deutsche, Ms. Riley worked at McKinsey & Company in Frankfurt and Greenhill & Co in New York and Frankfurt.

She is a graduate of Princeton University and the London Business School. 

Santander executive chair, Ana Botín, said, “I am delighted that Christiana will be joining Santander to lead our team in North America. She has an outstanding background and a strong track record and I’m confident she will play an important role as we continue to support our customers and leverage the collective strength of the group across the region, building on the outstanding progress Tim and Felipe have already made.” 

Santander serves 25 million customers across the US and Mexico, with c.45,000 employees and 1,900 branches. In 2022 the North America region generated 25% of group underlying profit with an adjusted return on tangible equity of 20.5%. 

Fixed-income in the Spotlight?

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In this new global context: rising interest rates and inflationary pressures triggered mainly by the expansionary monetary policies applied by central banks during the pandemic, together with a new geopolitical reality, investors’ and portfolio managers’ appetite for fixed income has been reawakened. Relegated in recent years due to low-interest rates, this asset class is now a tool for protecting purchasing power in the face of inflation.

The recent bankruptcy of Silicon Valley Bank (SVB) in March reverberated across markets, raising concerns about the impact on the financial sector in general and global monetary policy, reinforcing investment in fixed-income instruments as an exciting option for investors.

The US financial multinational Morgan Stanley is betting on bonds. It ranks them as the potential big winners of 2023. “This will be particularly true for high-quality bonds, which have historically performed well after the Federal Reserve (Fed) stops raising interest rates, even when a recession follows,” explained Andrew Sheets, chief strategist at Morgan Stanley Research.

For the first time since 2007, nearly 90% of the bond market yields above 4%. As BlackRock explains, the rate hike has brought the highest returns the US bond market has seen in over a decade.

The return offered by some fixed-income instruments in certain Latin American countries provides a unique opportunity to attract local or international investors through securitization tools and the creation of offshore investment vehicles or ETPs (Exchange-Traded Products), which allow increasing their distribution exponentially.

At FlexFunds, we can confirm that the creation of ETPs with this strategy has increased during the last year. Focusing mainly on Latin American investors, these instruments seek to offer:

1. Stability: Fixed-income investments are usually considered stable and low-risk compared to existing portfolio options. The fixed income is an instrument that offers a fixed interest rate paid periodically, which provides a constant and recurring source of income.

2. Income predictability: Since fixed-income investments offer interest at a predefined rate, it is feasible to project the amount and timing of the investor’s income. This is especially useful for those seeking steady sources of income to plan their budget.

3. Inflation protection: this is a key benefit of fixed-income bonds. Typically, these bonds come with an interest rate higher than the inflation rate, which means that the investor is protected against the erosion of the purchasing power of their money.

4. Diversification: This asset class can be a valuable tool for diversifying an investment portfolio and reducing downside risk. Since the return on a fixed income is not related directly to the performance of stock markets, it can be an effective way to have a balanced and diversified portfolio.

In the current environment, to take advantage of the opportunity that fixed income is bringing to the table, and after evaluating various alternatives in the market, many asset managers have found FlexFunds‘ FlexPortfolio an efficient solution for the management and distribution of fixed income strategies because it allows them:

1. Flexibility: FlexPortfolio is an instrument tailored to the manager’s needs. The manager can choose and trade the assets they wish to invest and adjust their allocation according to the proposed strategy’s conditions.

2. Accessibility: Managers can expand their access to investors globally. The FlexPortfolio can be purchased from existing brokerage accounts simply as it has an ISIN number, with settlement through Euroclear/Clearstream.

3. Lower costs: The cost of setting up a FlexPortfolio can be half that of other alternatives in the market. Managers benefit from economies of scale and structural and back-office cost savings.

4. Transparency: FlexPortfolios offer complete transparency to the investor compared to other investment vehicles, as the underlying assets and their returns are always visible.

5. Versatility: One of the main advantages of the FlexPortfolio is that it allows a tailor-made combination of assets to be designed and executed in a single investment. A FlexPortfolio can include various assets: stocks, bonds, commodities, and currencies.

6. Liquidity: FlexPortfolios offer high liquidity because investors can subscribe and redeem their holdings in the portfolio more quickly, compared to buying and selling the underlying assets individually. The liquidity of this investment vehicle is directly proportional to the liquidity of its underlying assets.

In conclusion, in the current economic environment, fixed income can provide stability and security to investors due to its ability to offer fixed and relatively predictable income. However, as with any investment, it is essential to evaluate it carefully and have the right advice to weigh its pros and cons before making an investment decision. When establishing an investment vehicle that allows you to design and distribute a fixed-income strategy, FlexFunds‘ FlexPortfolio may be an alternative.

Pablo Gegalian serves as Regional Director of Southern Cone for FlexFunds .

As Value Oriented Stock Pickers, We Believe Now Is Our Time To Shine

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U.S. stocks were mostly higher to finish March despite a banking crisis that caused the second & third-largest bank failures in U.S. history. The market’s mood and outlook shifted as investors’ expectations about the Fed’s policy path drove a significant rotation into growth names, with big tech, semis and software among the notable beneficiaries.

The month started with thoughts of a higher terminal rate in response to stronger-than-expected economic data, supported by comments from Fed Chair Jerome Powell’s congressional testimony about accelerating the pace of rate hikes if necessary. However, investors quickly focused their attention on bank deposit stress and losses on held-to-maturity (HTM) assets, as an accelerating bank run brought about the rapid regulatory shutdown of Silicon Valley Bank (SVB) and Signature Bank (SBNY). Both banks had an unusually high ratio of uninsured deposits that spooked customers into seeking insurance.

On March 22, the Federal Reserve announced another 25bps rate hike at the end of its two-day policy meeting, bringing the targeted federal funds rate to 4.75-5.00%. During his press conference, Fed Chair Jerome Powell noted that the central bank may be nearing the end of its rate-hiking cycle but he qualified that the inflation fight is not over. Most investors still expect at least one more rate hike this year. The next FOMC meeting is May 2-3.

Growth stocks have substantially outperformed value stocks to start 2023. We believe this creates an opportunity for Value Investors. The market is pricing a cut in interest rates sooner than Powell’s comments imply. The current environment of rising interest rates will continue to put a premium on near term cash flows, which should benefit our portfolio of companies.

As value oriented stock pickers, we believe now is our time to shine. We continue to seek franchise businesses with barriers to entry, pricing power, recurring revenue and large free cash flow generation that are trading below Private Market Value. The environment is still ripe for value surfacing catalysts: while M&A activity was down in 2022, it is still robust compared to most historical years. Companies have many opportunities to pursue financial engineering, not limited to M&A. We believe our portfolio of holdings is well positioned to thrive in this environment and their value will be recognized by the market in due time.

Global M&A volume totalled $580 billion in the first quarter, a 23% sequential decline from the fourth quarter of 2022 and a decrease of 44% compared to the first quarter of 2022. Healthcare was the most active sector for M&A, totalling $97 billion of dealmaking, an increase of 60% compared to 2022, and it accounted for 17% of all deals. Technology and Industrials were the next most active sectors, accounting for 17% and 13%, respectively.

Private Equity activity remained robust, accounting for more than 25% of deal volume in the first quarter. Despite the global slowdown in deals, public company M&A in the U.S. remained stable sequentially.  Notable deals that closed in March include: Atlas Air Worldwide (AAWW-NASDAQ) which was acquired by Apollo Global for $5 billion, Coupa Software (COUP-NASDAQ) which was acquired by Thoma Bravo for $6 billion, Vivint Smart Home (VVNT-NYSE) which was acquired by NRG Energy for $5 billion, Altra Industrial Motion Corp. (AIMC-NASDAQ) which was acquired by Regal Rexnord for $5 billion,  and Duck Creek Technologies (DCT-NASDAQ) which was acquired by Vista Equity Partners for $2.5 billion, among others.

Despite the noted volatility this month, the convertible market finished slightly higher with strong performance following the CS acquisition. Convertible performance is more a function of underlying equity movements than interest rates, but both factors had a positive contribution over the last few weeks. Issuance has continued to trickle in and we have added some recent new issues to the portfolio. Generally, these have helped increase current yield while diversifying the portfolio with balanced convertibles.

We continue to remain optimistic for the possibilities of convertibles as an asset class this year, as they allow investors to position their portfolio cautiously while allowing them to participate when the market moves higher. There are many convertibles with a yield to maturity in excess of the long-term expected return of the convertible market despite solid and improving fundamentals. As we have noted previously, we have managed convertibles through multiple market downturns and have seen how they can be a great tool for companies to raise capital despite uncertainty while offering investors a risk-adjusted way to participate in a recovery.

 

Opinion article by Michael Gabelli,  Managing Director at Gabelli & Partners.