Fund industry dealmaker Jon Little has returned to the market with a new venture that is seeking to raise up to $2bn to buy equity stakes in asset management boutiques.
Little has reunited the team he has worked with for two decades to support his latest project, called Alderwood Capital, in preparation for the push.
Alderwood aims to exploit the consolidation drive sweeping across the fund management industry in the face of fee pressure, rising regulatory costs and the growing heft of low-cost passive investment houses such as BlackRock and Vanguard. To survive, many smaller groups are contemplating raising capital by selling stakes or taking part in full-blown mergers.
Little has been working on Alderwood following his departure two years ago from Northill Capital, the investment business he founded, in a disagreement over strategy with its backers, the pharmaceutical billionaire Swiss-Italian Bertarelli family. The acquisitive Northill had bought stakes in several investment managers, including a majority equity interest in the $26bn Strategic Investment Group.
“We like single-product, single-process, arch specialists that do one thing and do it well,” Little said in an interview. “Typically they are not household names.”
At Alderwood, Little is reuniting his former team from his days at Northill and BNY Mellon Asset Management before that, where he was chair and built the division through a series of deals to a $400bn business.
Rick Potter and Jeremy Bassil are both joining Alderwood as partner and senior adviser on July 1; Potter will be chair of the investment committee. The duo were founding partners of Northill with Little, after they all left BNY Mellon.
Alderwood is raising up to $2bn from institutional investors for the new fund and will put the money to work over the next six years. It follows a similar strategy to its larger, US-based rivals such as Neuberger Berman’s Dyal Capital Partners, AMG Group and Blackstone’s Strategic Capital Partners.
Alderwood will invest according to three different themes, said Little. He cited “succession capital”, where a mature business is going through a generational change, and “acceleration capital” to help a business scale up. And there is what Alderwood calls “liberation capital” — to buy out a division from a larger business.
“If we end up in a period of market stress some of these megamerger asset management firms are going to fall apart and there’ll be an opportunity to lift out divisions,” said Little.
A similar example of this was when BNY Mellon paid £235m to buy out Insight Investment, the asset management subsidiary of Lloyds Bank. Under its new owner, Insight’s assets have grown from about £80bn at the time of the deal to £752bn.
“Typically we are able to acquire at competitive prices as we are not bidding in auctions or targeting trophy assets,” said Little. “We tend to do smaller deals in companies that are less well known and tend to source deals ourselves.”