The democratization of alternatives has materialized largely through some of the biggest players in asset management, but the trend may now be moving toward smaller firms specializing in key asset classes.
Medalist Partners, a $2.2 billion alts manager, has acquired a minority stake in Semper Capital, a registered investment advisor focused primarily on mutual funds, to extend its client base and capitalize on what’s been dubbed the next big wave in asset management.
“There is significant room for cross collaboration that should benefit both firms, while at the same time expanding our reach across capital markets, the broker-dealer community, and investor types,” said Michael Ardisson, president and chief operating officer at Medalist.
The firm is leveraging opportunities in the structured credit market, which has repriced dramatically to levels unseen since the pandemic, according to Ardisson. Despite the current market conditions, some of the industry’s biggest managers continue to see opportunities in private credit as pensions and other asset owners remain committed to allocations there.
“There is ample green space in [this] market and eventually I expect many of those same names will begin the democratization effort and focus on retail [in the asset class] as well,” said Ardisson. “We’re a smaller manager in niche markets, but we have had strong traction with various RIAs and private wealth platforms already. As a result, I believe we have an early mover advantage.”
Medalist is one of a few credit specialists who have recently tapped into the retail market, which last year reached $42 trillion. The firm’s minority stake follows similar moves by larger peers: Marathon Asset Management launched a fund with John Hancock last year, Goldentree partnered with FS Investments, and Sound Point with American Beacon.
Medalist and Semper say that they’re seeing opportunities to beat the broader Mortgage-Backed Securities benchmark, which is down 15 percent year-to-date, and assert that they can build a diversified structured credit portfolio with cash flows at yields of more than 10 percent.
“We believe the current market environment offers both absolute yield and risk reward levels for structured credit not seen since the financial crisis and the Covid-related market disruption,” said Ardisson. “Semper’s mutual fund business is in prime position to take advantage of these opportunities.”
Medalist, which is raising its third asset-based lending fund, believes the timing is ripe, as market disruptions have created significant volatility in private lending and the asset-backed securities market.
“We have certainly seen from the wire houses and the RIA networks that they really like the strategy,” Ardisson said. “They want more [and] they want it in a vehicle that they can access more broadly for clients that aren’t qualified purchasers or otherwise eligible for private funds.”
The synergies are there. While educating the individual investor remains a priority, functions such as operations, accounting, marketing, and client profiles overlap for both firms.
“There is actually a lot of similarities in what’s being done,” said Ardisson. “What’s different is the underlying product offerings and who those are catering towards. [Now with] Semper’s products, which are open to the masses, we can certainty [increase] the clients that we reach.”