Two-and-a-half years after alternative investments shop Altegris merged with alternative investment-focused fintech company Artivest under the latter’s nameplate, the entities today announced they’ve entered into a definitive agreement where Altegris will gain control of its assets from Artivest and re-establish itself as an independent firm.
According to a press release, Altegris co-founder and current Artivest chief investment officer Matt Osborne has teamed up with Continuum Capital Managers, which makes equity investments in asset management firms and provides resources to help them grow, to purchase Altegris’s mutual fund and commodity pool businesses and operate them in a re-constituted Altegris with Osborne serving as CEO and CIO.
Terms of the agreement were not disclosed, and the deal is expected to close late this year.
As per the press release, the transaction completes the sale of Artivest's assets following the purchase of its proprietary alternative investment funds and its technology platform by iCapital Network, a New York City-based fintech platform focused on alternative investments. As part of that deal, which was announced in May and completed last month, Artivest would continue to manage the Altegris mutual funds and commodity pools under the guidance of Altegris Advisors, the existing portfolio management team.
The Altegris business wasn’t part of the iCapital transaction, which set the stage for Osborne and Continuum Capital Managers to take control of those assets and move them into a new company.
In an interview, Osborne said Altegris's mutual funds, which are the core of the business that he and Continuum are taking over, don't mesh with iCapital's digital platform for private equity and hedge funds.
"The publicly registered mutual funds aren’t consistent with iCapital’s business," he explained. "I saw that opportunity [to re-establish Altegris as a stand-alone entity] when Artivest and iCapital first began talking about this transaction in March."
Based in La Jolla, Calif., Altegris was founded in 2002 and has long been a player in the alternative investments space via its platform enabling financial advisors to access hedge funds, managed futures funds and liquid alternative mutual funds.
Altegris was purchased by Genworth Financial Wealth Management in 2010, and three years later came under new ownership after two private equity firms—Aquiline Capital Partners and Genstar Capital—acquired Genworth Wealth Management. That sale included Genworth's GFWM and Altegris businesses. Aquiline and Genstar are outside investors in Artivest, whose platform connects investors with private alternative investments.
In February 2018, Altegris merged its operations into Artivest, a move the companies said would expand investors’ access to alternatives.
The newly independent Altegris will manage roughly $800 million in assets, and has its eyes set on acquisitions and new product launches, particularly in the publicly registered space, Osborne said.
Alternative investments, including liquid alts in the form of mutual funds and exchange-traded funds, experienced a demand surge following the Great Recession as investors sought products designed to provide a degree of noncorrelation to traditional stocks and bonds. By and large, these products aim to dampen portfolio volatility and provide drawdown protection in down markets. But the influx of new liquid alts products coincided with the longest-ever bull market in U.S. equities.
That was a case of bad timing because the beauty of portfolio insurance against falling markets is lost during a long period of rising markets. Throw in the fact that alternatives—both public and private—are more expensive than passive funds, and some investors commenced to grumble about the performance of their alternative investments.
Osborne acknowledges the alternatives space has had its ups and downs, but he sees a continued need—and demand—for alternatives among investors.
"There have been periods of disappointment in their performance, but investors are still looking to be diversified and to build portfolios that can manage the downside volatility," he said. "In an era where 60/40 [portfolios] is really challenged because fixed-income yields essentially are locked in at zero, there continues to be demand for alternatives. That's not only from institutions, but from financial advisors as well."