The already blurred line between investment consultant and money manager is getting fuzzier as both types of firms aim to serve investors desiring strategic relationships that cut across alternative investment asset classes and require fewer managers.
These firms are aiming to offer multiple asset classes as a way of winning strategic partner and separate account mandates. Firms that started out as private equity managers — such as Apollo Global Management LLC, KKR & Co LP and The Blackstone Group LP — have been continually expanding their investment capabilities and managing strategic accounts since the financial crisis.
Alternative investment managers that started out in the funds-of-funds business and consulting firms are following suit. In January, Chicago-based private equity management firm Adams Street Partners LLC hired former Oaktree Capital Management LP private credit executives William Sacher and Shahab Rashid to form a new private credit group.
Earlier this month, StepStone Group LP, an alternatives investment manager that has its origins as a private equity consulting firm, acquired Swiss Capital Alternative Investments AG, a European private debt and hedge fund business. It also hired a 15-member infrastructure team from KPMG LLP’s institutional investment advisory business.
The infrastructure team is expected to start working at StepStone this summer, bringing a new line of business to the firm. When the Swiss Capital deal closes — expected near the end of 2016 — StepStone will launch a new private debt business and a new hedge fund business.
This will pretty much round out the firm’s evolution into a multiasset class discretionary and non-discretionary alternative investment manager.
“Institutions that we work with all want to work with a smaller number of service providers,” said Monte Brem, partner and CEO of the La Jolla, Calif.-based StepStone. “Our main focus is customized separate accounts — discretionary and non-discretionary.”
Investors are looking to hire firms that can provide multiple investment offerings, rather than working with specialized boutiques, Mr. Brem said in an interview.
“To get the designation of a ‘strategic partner’ you have to do multiple things,” he said.
StepStone added infrastructure and private debt because investors are seeking replacements for fixed income, Mr. Brem said.
The new additional resources will give the firm the ability to offer real estate and infrastructure debt strategies. It also gives StepStone businesses in a large swath of alternatives investment asset classes across the globe, including buyout, venture capital, energy and real assets.
“I think this reflects what is happening in the market generally,” Mr. Brem said. “There’s a breakdown of (the distinction between) advisers and money managers driven by institutional investors. It’s a complicated market to operate in because of the demand of institutions, and because there is more and more capital going into separate accounts.”
StepStone is not alone in evolving in this way. In February, TIAA Global Asset Management combined its real estate, timber, agriculture, energy, infrastructure and private equity businesses into a single real asset business.
The firm created the single platform “to accommodate investor interest and create synergies,” said Chris McGibbon, managing director and head of real estate for the Americas, based in TIAA’s Charlotte, N.C., office.
It is mainly larger institutional investors that are interested in the separate accounts, Mr. McGibbon said in an e-mail.
“Several of our larger clients — those committing $300 (million) and above — have shown a preference for separate accounts and strategic partnerships,” Mr. McGibbon said. “However, we are also seeing a strong interest in our commingled products from clients that prefer smaller commitment amounts and may not have the resources to deal with the significant administrative demands of separate accounts and ventures.”
