Investcorp Investment Advisers LLC’s acquisition of the hedge funds-of-funds business of SSARIS Advisors LLC is likely just the first in a string of planned purchases to bolster the firm’s hedge fund capabilities.
The acquisition of the Wilton, Conn.-based SSARIS business added $800 million of discretionary and advisory assets and a four-member funds-of-funds investment team to Investcorp’s own $1.7 billion hedge funds-of-funds unit.
Terms of the deal, which closed on Nov. 2, were not disclosed.
Investcorp Investment Advisers, New York, managed a total of $10.6 billion in alternatives investments as of June 30: private equity, $4.8 billion; hedge funds (customized funds of funds, single manager hedge funds, co-investments and alternative risk-premium strategies), $4 billion; real estate, $1.5 billion; and client capital calls held in trust, $324 million.
The recent exercise of crafting a “medium-term road map” for growth of Investcorp’s alternative investment offerings in the next five years made it clear that “it’s all about cross-fertilization and cross-selling,” said Rishi Kapoor, co-CEO, noting he’s seeking scale and higher profitability.
Part of the company’s asset growth might come from expansion of distribution channels in Europe, where only private equity strategies are marketed now, Mr. Kapoor indicated. By contrast, Investcorp has established distribution networks for private equity, real estate and hedge fund strategies in North America and the Middle East.
The non-geographic element of Mr. Kapoor’s growth equation is hedge funds, which he said are “a big contributor to scale and are very good for cross-fertilization.”
Until now, Investcorp has relied on internal organic growth, a build-rather-than-buy philosophy. But to achieve the scale he needs, Mr. Kapoor is on an acquisition spree.
“SSARIS is the perfect poster child for our strategic intent,” Mr. Kapoor said, noting he “wants to signal our intent to acquire more hedge fund firms.”
The addition of the SSARIS quartet of hedge funds-of-funds investment specialists is part of Lionel Erdely’s own hiring spree: He has hired 20 new staffers since assuming the role of chief investment officer and head of hedge funds early last year.
The latest team is led by Andrew Fisch, CIO of hedge funds of funds at SSARIS, who will join Investcorp’s investment department. His title will change to senior portfolio manager.
Accompanying Mr. Fisch from SSARIS are portfolio managers David Ahn and Jerett Yelton and hedge fund analyst Michael Malvarosa, who will retain the same titles and roles at Investcorp.
Mr. Erdely said the new team is complementary to Investcorp’s existing hedge funds-of-funds business. Most of the assets are managed in customized multimanager portfolios, an area where the SSARIS team has considerable experience because of the firm’s consulting and discretionary management approaches. The foursome also will add heft to the assessment of co-investment deals offered through hedge fund managers, he said.
The SSARIS team also brings with them their prior firm’s flagship strategy, multimanager absolute return.
“Investcorp has focused almost too much on building customized hedge fund portfolios and needed a flagship funds-of-funds strategy. Investors like to see that a firm has a flagship fund they can look over. SSARIS’ fund has a long, 14-year track record,” Mr. Erdely said.
SSARIS’ hedge fund investment business was not part of Investcorp’s acquisition.
As of Jan. 31, SSARIS reported net assets under discretionary management of $875 million and $764 million in non-discretionary consulting assets on its most recent ADV form filed with the Securities and Exchange Commission.
Paul R. Lucek, director, CEO and CIO of hedge funds at SSARIS, did not return a call seeking information about how much is managed in single and multistrategy hedge funds and the firm’s plans.
Investcorp officials declined to break down how much of the $800 million coming from SSARIS is managed on a discretionary basis vs. advisory only.
Most of SSARIS’ hedge funds-of-funds assets are moving to Investcorp, said Alyssa LaCorte, an Investcorp spokeswoman in an e-mail. She declined to say how many SSARIS investors have agreed to move their portfolios to Investcorp.
