Amid Market Turmoil, A New Alternatives Joint Venture Emerges

Alternative investments shop Investcorp and European asset manager Tages have consolidated their absolute return businesses to form a new joint venture with roughly $6 billion in revenue-generating assets.

The venture, called Investcorp-Tages Limited, includes customized portfolios, a hedge fund seeding business, and multi-manager portfolios in private debt and other alternative investments. Tages Group contributed its absolute return and multi-manager solutions business, called Tages Capital, to the joint venture. 

Investcorp-Tages is led by Lionel Erdely, head of Investcorp’s absolute return business as well as its chief investment officer, and Salvatore Cordaro, founding partner and CIO of Tages Capital. 

Erdely told Institutional Investor that discussions about the tie-up started a year ago, long before the global economy was devastated by Covid-19.

“No one expected we would be here,” he said. “We have completed this exciting partnership despite the environment. Our team is in London, Italy, France. It was very humbling.”

Cordaro said he and Erdely recognized the importance of size in the asset management business. 

“It gives you the bench of talent, the ability to access new markets, to continue to innovate, and to enter interesting niches in our space,” said Cordaro in an interview. 

Cordaro added that the two firms are also complementary when it comes to their geographical footprint, investors, and investment capabilities. Tages Capital is stronger in Europe, while Investcorp has a base in North America and the Middle East.

“We have no overlap in terms of our investor base. We are also active in very similar spaces, but we have very little investments in common, which means we can really bring a lot of value in combining the two businesses,” he said.

Forty percent of the combined business’s clients are in North America, with the remainder spread out between Europe, the Middle East, and Asia. 

The two firms have deployed $2 billion in assets between them and seeded 42 emerging managers, mostly hedge funds. In addition, managers seeded by both businesses currently oversee $8 billion in assets. 

[II Deep Dive: Investcorp Launches Business to Take Minority Stakes in Midsize Alts Firms]

The JV will develop longer term, less liquid, multi-manager sustainable and impact investments. 

Other opportunities for the new venture include relative value and special opportunities. “If you are a relative value manager, particularly in credit, the dislocations we’ve seen over the last few months will be a great opportunity,” said Cordaro.  

Added Erdely, “We’re looking at all areas, including customizing, seeding special situations, and quantitative. There are a lot of dislocations today; with more relationships with managers, we’ll be able to build on those and identify more opportunities.”