Industry veterans wonder where the payoff will come from if Hopkins Capital Group succeeds in acquiring stakes in a portfolio of investment management consulting firms.
On Feb. 11, executives at the Tampa, Fla., venture firm that invests in health-care technology firms announced what they said was likely to be the first of several investments in the industry an agreement to acquire 51% of Taft-Hartley investment consulting leader Marco Consulting Group Inc., Chicago, over the next five years.
In an interview, Frank E. ODonnell, Hopkins chairman and chief executive officer, said hes looking to harness the model Boston-based Affiliated Managers Group Inc. has used in the money management sector taking stakes in asset management firms that are left largely autonomous.
By providing a path to succession and paving the way for continued growth, that AMG model can be extrapolated successfully to the investment consulting industry, Mr. ODonnell said. He said he already is talking with leading firms advising public plans, corporate plans, health-care organizations and endowments and foundations.
He declined to name the firms hes speaking with, or provide details of Hopkins investment in Marco. Jack Marco, chairman of Marco Consulting Group, also wouldnt discuss terms of the deal.
Industry veterans questioned how Hopkins will be able to squeeze outsized returns from a people-intensive industry existing mainly on retainer fees that, unlike money manager fees, dont rise automatically as the clients portfolio grows.
While investors have looked at investment consulting firms with an eye to pursuing higher-fee businesses, such as the multimanager offerings of Tacoma, Wash.-based Russell Investment Group or Oaks, Pa.-based SEI Investments, its unclear whether investing strictly in the underlying consulting business can be a winning strategy, said David L. Eager, a partner with Louisville, Ky., money manager consultant Eager, Davis & Holmes.