This Asset Manager Is Turning the GP Stakes Model on Its Head
In an increasingly crowded market, European manager Azimut is using permanent capital and the promise of retail distribution to attract and align itself with alternatives firms.
The business of taking stakes in alternatives managers has gotten crowded and complex.
Azimut Group, one of the largest European asset managers, is attempting to differentiate itself from the competition by investing its own money rather than raising private capital from investors. But, even more importantly, it’s offering alternative investment partners potential distribution through its network of 2,300 financial advisors around the world.
Massimo Guiati, group co-CEO and head of distribution for Italy-based Azimut, said the move aligns the interests of Azimut with affiliates for the long-term. Since the firm offers products from these managers through its own financial advisors, it can’t compromise on quality. Otherwise, Azimut risks its own reputation with both advisors and end investors by pushing mediocre products, or worse.
“We’re taking a different approach,” Guiati said. “We’re trying to democratize the private markets, real assets, private equity, private credit, infrastructure — all related to the real economy. That’s where we can create the most value.”
With the institutional world saturated with alternatives funds, Azimut is betting that managers will be attracted to the potential access they’ll get to high-net-worth and other retail investors, a nearly greenfield opportunity and one which is expensive to break into for anybody but the largest firms. Blackstone, for example, said in its latest earnings announcement that its fastest growing channel is retail.
Taking stakes in alternatives firms has become a big and complicated business. Three of the biggest players are Dyal Capital Partners — which is soon merging with affiliate Owl Rock Capital — Blackstone, and Goldman Sachs, which take financial stakes in the largest firms through institutional funds. Investcorp and Kudu Investment Management, which invests permanent capital from its insurance company backer, are two others seeking middle-market firms. And publicly traded Affiliated Managers Group has long been taking stakes in traditional and alternatives managers and helping them grow by offering various services.
With Azimut investing its own capital, it doesn’t have to seek an exit from managers.
“The mechanism is GP stakes, but we’ve flipped the model around,” said Jeff Brown, CEO of New York-based Azimut Alternative Capital Partners, which is making the investments. “We completely side-step the issue of GPs being concerned about stake exits because we are investing permanent capital and that leads to a much different discussion about alignment. The light bulb goes on when sellers start to really understand the benefits of our strategic emphasis on getting high quality products to our investor base.”
Guiati said Azimut also has a compensation scheme for 2,000 employees, including senior management, that is uniquely long term as well. “My shares are in a trust and I can only sell at 65,” he said. “I’ve been here 13 years, joining from an investment bank, where people have a three-to-five year lock up. I was 36 at the time, and I knew I can only sell at 65. That gives you a certain mentality, and it puts us in line with our relationships with clients.”