Asset management holding company Easterly Partners Group has formed a strategic partnership with White Mountains Insurance Group, a financial services holding company with $3.6 billion under management.
White Mountains will provide growth capital to Easterly so the holding company, which targets strategic growth at asset management firms, can expand. The insurance company may also invest with Easterly affiliates and could provide funding to acquire joint-stakes in additional asset managers with Easterly.
As part of the partnership, White Mountains took a small stake in Easterly Partners, the size of which wasn’t disclosed.
Darrell Crate, one of Easterly Partners’ three managing principals and former chief financial officer of Affiliated Managers Group, said Easterly had “a formula for asset management product development, positioning, culture, and succession. But we needed a balance sheet.”
When Crate was at AMG, the firm invested in or formed partnerships with 27 asset management firms. Easterly has stakes in four asset managers, but Crate declined to name them. The two other managing principals are David Cody, an early partner of Fortress Investment Group, and Avshalom Kalichstein, a former managing director at J.C. Flowers & Co.
Crate said the company will use part of the investment from White Mountains to scale its business, including adding sales executives. According to Crate, asset managers, particularly those in large-cap equity, are under pressure as fees have declined and costs have risen, including the price to comply with new regulations and other requirements.
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“Twenty years ago, firms were getting 100 to 120 basis points in fees for equities. Now investors can buy that for 35 to 40 basis points,” he said, adding that firms have had to grow to have the same profitability. “We think we can solve those problems and give them a tailored growth strategy.”