Affiliated Managers Group is purchasing an equity stake in $4 billion Garda Capital Partners, a Minneapolis asset manager specializing in fixed-income relative-value strategies.
Terms of the deal were not disclosed, but Garda’s eight-member senior management team, which includes investment, business management and operations executives, will continue to hold a majority of the equity and run the firm on a daily basis.
Jeff Drobny, Garda's CEO and chief investment officer, said the firm entered into the deal with AMG because the tie-up offered it the ability to design a succession plan and create incentives for the firm’s next generation of leadership.
AMG, which has about $778 billion in aggregate assets under management, makes equity investments in boutique investment management firms. Under AMG's model, affiliates’ management teams own significant equity in their firms and remain autonomous.
“The partnership is not facilitating any form of exit,” said Drobny. “It is assuring the continuity of our leadership for a long enough period of time that we will feel confident in designing our succession plan. Continuity is the number one focus.”
The market for stakes in asset managers has been heating up in recent years for a few reasons, including the need to make succession plans as founders near retirement age, increased pressures on fees, and the rising costs of regulation. Easterly, iM Global Partner and other investment firms that take stakes in managers have done deals this year.
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Aside from succession, Drobny said the partnership with AMG will allow Garda to tap into in-house knowledge about areas that it has committed significant resources to over the years, such as cyber security and technology.
“We have a lot of research committed to both of those areas, but there are a lot of opportunities to lever best practices that other AMG affiliates have implemented over the years,” said Drobny.
Garda also plans to tap AMG’s capabilities in marketing and distribution in the Middle East, Asia — particularly in Japan — and Scandinavia.
The transaction is expected to close in the third quarter.