Fortunately, for these managers, there are plenty of asset managers willing to partner with firms with these sorts of situations. These firms range from large, global firms to boutiques with distribution to much smaller firms looking to help their business. Some are funded with outside capital to fund these opportunities. Others are self-funded. They can gain ownership stakes or just collaborate in different ways.
Hortz: What kind of ideas should boutique managers be open to but may be unaware of the flexibilities they may have in negotiating and structuring of those options?
Sondhelm: Most asset managers that are looking for a strategic partnership have specific goals in mind. It just depends on their needs, preferences, and what they want to accomplish – and finding a strategic partner looking for the same thing. There are many models that can create a win-win situation depending on what both sides are looking for.
Some asset managers wanting to sell the firm fully or in part can become an affiliate or blended in within a larger firm. They continue to manage money while handing over the headaches of running the business over to the larger firm. They can sell all or a portion of their business and remain a fund manager within another organization.
Other managers that want to remain independent can have their mutual funds reorganized or adopted by a firm with distribution. The funds can be reorganized and rebranded by the new firm. The manager can then be hired by the firm to subadvise the funds, and possibly more.
For firms that want to grow but are not interested in selling anything, one of the simplest models is a sub-advisory relationship. An asset manager will be hired by a more prominent firm that has established distribution channels to take over existing portfolios, often underperforming, or to start a new mutual fund. To start a new fund, it often helps if the asset manager can fund the fund with $20-30m AUM. This capital, and the commitment to distribution by the other side, shows both sides have “skin” in the relationship.
Hortz: What services do you offer to explore and expedite these new partnerships?
Sondhelm: We are a firm that helps asset managers grow. We help with marketing, public relations, and sales. We also work with asset managers that want to find a strategic partner.
Our strategic partnership group helps clients explore what they want to accomplish and then outline the types of strategic partners that can help deliver it. We help clients understand what results are realistic and what it will take to get there. We often help a firm position themselves for success and better tell and position their stories specifically for the acquiring firm.
We develop materials, prioritize outreach, make phone calls, and send emails to key people within the acquiring firms to try to garner interest. When there is interest, we prepare our clients for the call, outline what to expect, help keep the process moving, asking the right questions, and supporting negotiations until the deal is done, while guiding them around the mistakes commonly made. However, we are not an investment bank, so it is essential for our clients to retain their team of trusted advisors depending on the direction they want to go.
Hortz: How do you help the firms with distribution looking for niche managers?
Sondhelm: We have strong relationships with many of the asset managers in the industry that are looking to partner with other asset managers. We learn what types of firms they are looking for, what types of investment strategies they are seeking, and what types of deals they prefer.
Many of them have strong teams of folks looking to add strategic partners. Others are newer to the strategy of growth through strategic partnerships. We help where they need it. Then we bring them good ideas.