GAM has bought USD4 billion Cantab Capital Partners for a USD217 million upfront cash payment. GAM is also to launch the GAM Systematic investment platform, focused on quantitative investing across long only and alternative strategies.
The firm writes that the acquisition accelerates GAM’s strategy to diversify its active management capabilities is expected to be significantly accretive to GAM’s underlying earnings per share in the first full year of ownership; closing expected in H2 2016.
The cash for the purchase has come from GAM’s existing cash resources, and deferred consideration based on future management fee revenues and the firm writes that the transaction structure aligns the interests of GAM, Cantab employees and clients through deferred consideration payments; Cantab partners retaining a 40 per cent interest in future performance fees; long-term employment agreements with revenue-based compensation, consistent with GAM’s customary compensation models and the Cantab partners re-investing the majority of net sales proceeds into Cantab’s funds for a multi-year period.
The firm writes that by moving into the growing segment of scalable systematic investing, GAM takes an important step to deliver on its long-term objective to expand and diversify its active asset management business. “Leading systematic strategies are attracting substantial allocations from investors globally due to their compelling returns and their rigorous, disciplined investment processes.”
Alexander S Friedman (pictured), Group Chief Executive Officer of GAM, says: “We have been evaluating how best to enter the systematic space for the past 18 months because we believe it represents an important capability for an active investment firm in the current environment and in the decades to come. GAM Systematic will offer our clients a compelling range of unique products complementary to our strong discretionary product range at a time when the investment industry is challenged to provide cost-efficient, liquid and diversified sources of returns.”
“The market turmoil following the UK referendum last week has only reinforced our determination to pursue, and deliver on, our strategy of diversification and long-term growth. In Cantab we are acquiring industry-leading intellectual capital, a highly distinguished decade-long investment performance track record, and a profitable and scalable business. In combination with GAM’s global distribution reach, I am convinced that this business is well positioned for significant growth.”