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iM Global Partner acquisition of Dynamic Beta stake drives liquid alternatives ETF launch

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Multi-boutique platform, iM Global Partner, has acquired a 45 per cent stake in Dynamic Beta investments, formerly Beachhead Capital, in a move that will bring a new suite of liquid alternative ETFs to the market.

Philippe Couvrecelle, chairman and CEO of iM Global Partner, explains that the firm’s business model over the last five years since launch in 2013 is a global ambition to take minority stakes in high talented boutique asset managers in both the long only and the alternative space.

This platform they combine with a distribution platform which covers the US and Europe and has been in development since March 2018.

“The idea is to support the development of the partners in which we have stakes on the platform,” explains Couvrecelle. “The stakes we take are permanent; we are not a private equity fund. We are here to stay and to help through the distribution side to develop products into markets in which they are not present.”

The firm’s growth has been steady since 2015, with a first investment in Polen Capital; 2016 saw a stake in Dolan McEniry followed by Sirios Capital Management in July and now Dynamic Beta investments.

The first four investments represent pro rata assets under management of USD7.7 billion while the four firms manage USD30 billion between them.

“We decided two years ago to develop our investment in the hedge fund side and, looking at the long-term horizon, to build a widely diversified platform focus.”

The first investment in the alternative sector was in long and long/short manager Sirios and this new investment in Dynamic Beta investments, which manages liquid alternatives, is the next step.

“We needed a liquid alternative manager and we had been discussing with many players,” Couvrecelle says. “When we met Andrew and his team we loved what they have built in terms of management and appreciated their track record and loved the team.

“After all of our due diligence, which was long and painful, we decided on both sides that we should make a partnership as there were strong opportunities to develop products in liquid alternatives for both the US and the European markets.”

Andrew Beer (pictured), Managing Partner of Dynamic Beta investments, with USD700 million under management, explains that the firm manages both liquid alternatives and invests directly in hedge funds.

“We were at an important inflection point in the liquid alternatives space,” Beer says. “Our findings show that 80-90 per cent of product within the mutual fund, ETF or UCITs formats have failed to meet their performance expectations.

“We are one of the few or only liquid alternatives, that I am aware of, that has managed to outperform actual hedge funds over the past decade but with reasonable fees and daily liquidity.”

Dynamic Beta investments started with the idea of delivering the returns of a leading hedge fund but without the illiquidity, high fees and the risk of gating.

“We introduced the Dynamic Beta strategy back in 2007 and now at this inflection point where investors are re-examining their allocations we believe there is a wide open opportunity to introduce a range of liquid alternative products that perform, at reasonable fees and designed to match what investors are looking for.”

The current largest investor in Dynamic Beta investments is SEI Investments, the USD330 billion asset manager, who asked Dynamic Beta to build a fund for their offshore investors in 2015, designed to deliver the performance of a leading hedge fund portfolio but in a daily liquid fund format, with reasonable fees.

Beer says: “As we work with our new partners one of the important strategic synergies between us and them is that they have the ability to create their own ETFs. If you look within the alternative ETF space, it is tiny by comparison to the alternative mutual fund market. ETF investors all over the US are building portfolios of ETFs but missing a key piece of their asset allocations.”

iM Global Partner has a strategy to build a suite of ETFs that can deliver the returns of hedge funds in an ETF wrapper.

“The process has begun,” Beer says. “We are starting in the US because the US ETF market is five years ahead of the European market and what is interesting is that, when we have interviewed allocators, what they are looking for are products that match or outperform illiquid hedge funds with a high level of predictability in a low-cost ETF wrapper and there is nothing in the alternative ETF space that meets those criteria today.”

Beer comments that his new partners are extremely strategic and methodical in their thinking so they will launch the first ETF within the next quarter or two and then as recognition builds around that ETF and as they get feedback, there is a plan to follow that with subsequent ETFs.

“Our primary focus is ETFs and one of the things that was very attractive to us is that iM Global Partner is an investor with institutional gravitas, best in class distribution and the team is entrepreneurial and flexible in its thinking.”

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