Victory Capital Management Inc. officials are on the prowl.
After buying two money management firms in the past eight months — most recently, Compass Efficient Model Portfolios LLC — executives at the Cleveland-based firm are looking to acquire additional boutiques. They particularly are looking at alternatives managers as part of an expansion plan that already has seen Victory more than double its assets under management.
“This is an exciting time to be in the money management industry, but given the dramatic changes and challenges, there are going to be a lot of winners and losers,” Jim FitzGerald, Victory's vice chairman, said in an interview.
Mr. FitzGerald said Victory plans to succeed in a climate in which smaller firms are being challenged because of increasing regulatory burdens and difficulty maintaining adequate distribution in the face of an increasingly competitive environment and rising technology costs.
Victory's plan is to buy smaller firms and let their investment teams do what they do best — invest — while giving them ownership stakes in the new company and providing them with centralized staff to handle regulatory matters, distribution and technology, he said.
Under Victory's business model, individual firms still maintain their own names and identities, Mr. FitzGerald said.
The model has been successfully mastered by Affiliated Managers Group Inc., for example, but others — including Legg Mason Inc. — have struggled, said Russell Campbell, president of Las Vegas-based Your Second Opinion LLC, a consultant to money managers.
“The success or failure often comes down to implementation,” Mr. Campbell said, noting that integrating technology, culture and people from different organizations into one company can be fraught with challenges.
Victory itself didn't exist as an independent firm until August 2013. Top officials of what was the asset management arm of KeyCorp, aided by private equity firm Crestview Partners, that month closed on a $246 million deal to create an independent asset management firm. Officials of publicly traded KeyCorp said at the time the move was part of a strategy to focus on its core banking operations.
Victory completed its first purchase — of Munder Capital Management, Birmingham, Mich. — in October. Munder managed about $18 billion, doubling Victory's assets.
On Dec. 1, Victory announced its second deal, acquiring the business of Compass Efficient Model Portfolios, Nashville, Tenn., which has $1 billion in AUM, mostly in passive smart beta strategies.