Victory Capital is to acquire Harvest Volatility Management (Harvest), a specialist in derivative asset management with approximately USD12 billion in assets under management (AUM) as of 31 July 2018.
On the closing of the transaction Victory Capital will have approximately USD75 billion in firm-wide AUM, including approximately USD16 billion, or 21 per cent of total AUM, in its Solutions Platform strategies.
Harvest, which is based in New York City, was founded in 2008 by Chief Executive Officer and Portfolio Manager Richard L Selvala, Jr and Managing Partner and Chief Risk Officer Curtis F Brockelman, Jr. Harvest has established a strong track record in managing strategies that enhance yield and reduce asset class risk exposures.
Victory Capital’s integrated multi-boutique business model will enable Harvest to continue to employ its structured and disciplined investment process while remaining an independent brand. Harvest’s seasoned investment team will continue to leverage its proprietary technology platform, which supports its analytic, trading and risk management functions.
“Harvest offers a cutting-edge suite of strategies that are designed to provide investors with risk-managed sources of income, absolute return and varying levels of market exposure,” says David Brown, Chairman and Chief Executive Officer of Victory Capital. “The addition of Harvest as our 10th Investment Franchise aligns squarely with our stated acquisition strategy. The firm is a strong organic grower with highly specialised investment capabilities, which are outcome-oriented, highly customisable and address a specific need in client portfolios.”
“We are excited to become part of Victory Capital’s platform, with its substantial operational resources, highly complementary distribution network, and track record of supporting boutique investment firms,” says Selvala. “As always, our team will continue to seek to generate attractive risk-adjusted returns for our clients.”
Victory Capital and Harvest are both committed to employee ownership as a means to ensure alignment with current and future clients. Following the acquisition, Harvest’s senior management will be meaningful equity investors in Victory Capital. They also will continue to be significant investors in the strategies that they manage.
Brockelman adds: “Harvest and Victory Capital share a strong entrepreneurial culture and commitment to technology and product innovation. We look forward to leveraging the Victory Capital team’s expertise and capabilities as we evaluate attractive opportunities and solutions for our clients.”
The transaction, which is expected to be accretive to earnings per share, will be financed through a combination of debt, equity and cash on the balance sheet, with the potential for an earn-out, payable to the sellers, over time if certain growth objectives are met. The acquisition is expected to close by the end of the first quarter of 2019, and is subject to regulatory and other customary approvals, conditions and consents, including approval by Harvest’s clients.
Seward & Kissel LLP acted as legal advisor to Harvest Volatility Management, LLC in this deal.
