Ramius LLC is an institutional alter-native investment firm that has begun to broaden its client base to include mass-affluent retail investors-as well as their advisors.
Ramius, based in New York City, was founded in 1994 by three executives who had all run institutional firms. Peter Cohen had been chairman and chief executive of Shearson Lehman, Morgan Stark president of the securities division of the Chemical Bank and Thomas Strauss president of Salomon Brothers.
When the three men were deciding what kind of firm they wanted to build, two thoughts came to mind. "One, we were committed to alternative investments," says Strauss. "At the time, the world was way under invested in this space."
Two, having all run large institutional firms, they wanted to limit themselves to servicing institutional clients at first. "We thought we had the latitude-and I think in hindsight we did-to think about a diversified platform, which would give investors different ways to access the alternative investment space," says Strauss.
From the outset, Ramius has had an internal hedge fund business, a fund-of-funds business that outsources all capital and a real estate business. As of October 1, the firm had $8.2 billion in assets under management.
In November 2009, Ramius combined with Cowen Group to create a diversified financial services company comprising two business units. Ramius operates the combined company's alternative investment management business, while Cowen continues to run the company's investment banking franchise, as well as its research and brokerage services.
Broadening The Investor Base
About two years ago, the Ramius principals turned their attention to the U.S. retail market, which they considered underserved by the alternative investment community. The question was how to approach the market. Starting a brokerage firm did not make sense, says Strauss, so they decided to focus on large global platforms and regional U.S. firms that distribute alternative investment products.
Their analysis of these distributors indicated that a huge opportunity lay before them. Whereas foundations and endowments allocated 25% to 40% of their assets to the alternatives sector, according to Strauss, the large distributors committed only 2% to 3%, a paltry $100 billion out of the $4.5 trillion to $5 trillion Ramius estimated they had under advisement-and the platforms were looking to significantly increase that.
"We were in a position to engage in a relationship with some of these larger firms to provide products so they don't have to get to know us two, three or four times; they could do that once and then look at each solution as a stand-alone product. That's the business model," Strauss says.
Working with the platforms presented two challenges. One was philosophical. "We are not going to distribute any product through a retail channel that is not of institutional quality, that we would not sell to a large insurance company or pension fund," he says. "That's something we've strongly believed in as we think about distributing products to institutions, ultra-high-net-worth individuals and mass-affluent retail investors."