Traditional money managers are stepping up the pace when it comes to buying stakes in alternative investment firms, particularly private equity and real estate managers.
The reasons: More institutional investors are allocating to private markets, and managers that are courting those investors also are seeking to diversify their revenue streams.
“We've been in, and are projected to stay in, a low-growth world, so investors need alternative sources of alpha,” said Joseph Sullivan, CEO of Baltimore-based Legg Mason Inc. “The traditional equity and fixed-income returns aren't expected to meet the demands of investors. So private equity and real estate strategies are increasingly becoming mainstream.”
Earlier this year, Legg Mason bought a majority stake in real estate investment specialist Clarion Partners.
Other recent deals include OM Asset Management agreeing in June to acquire a majority interest in Landmark Partners, a secondary private equity, real estate and real asset firm.
And Neuberger Berman Group LLC's private equity subsidiary, Dyal Capital Partners, which buys minority stakes in alternative money managers with a focus on hedge funds, has recently increased its private equity acquisitions focus.
Last year, Dyal Capital acquired minority equity stakes in private equity firms Silver Lake, Starwood Capital Group and KPS Capital Partners.