(Corrects executive's title in fourth paragraph from head of
quantitative investment strategies to head of customized and tax
efficient beta businesses)
By Lauren Tara LaCapra
NEW YORK, April 22 Goldman Sachs Group Inc's
asset-management business has agreed to buy Westpeak
Global Advisors, a firm that aims to beat market indexes by
using factors other than company size to pick stock investments.
The deal, disclosed on Tuesday, comes as Goldman is working
to bulk up its asset management unit, partly by strengthening
its quantitative product offerings. It is also part of a broader
trend of money managers offering so-called "smart beta"
strategies that deliver the high returns of some actively
managed fund but with the lower cost of investing in an index
fund or exchange-traded fund.
Westpeak creates and distributes its investment strategies
through alliances with companies including FTSE Group, Russell
Investment Group and Natixis. Like other smart beta firms it
picks stocks for its index funds based on factors apart like
volatility, liquidity or relative value, rather than market
In an interview, Armen Avanessians, the head of Goldman
Sachs Asset Management's quantitative business, and Gary
Chropuvka, its head of customized and tax efficient beta
businesses, said the deal was attractive because Westpeak's
products complemented GSAM's existing offerings and because its
employees were a good cultural fit within the Wall Street bank.
"We were enamored with the approach and we're quite excited
about the people," said Avanessians.
Goldman declined to provide terms of the acquisition, which
it expects to close in June. Westpeak and its employees will
remain in Boulder, Colorado, where the company is based.
Goldman is still working to repair damage from
quantitative-fund losses during the financial crisis. One of its
biggest quant funds, Global Alpha, shuttered in 2011 after
losing more than $10 billion of investor money since 2007.
In a report last October, Credit Suisse analysts said GSAM
was still suffering from a lack of client demand for quant
products. Chropuvka said the business has seen "pretty strong
flows" recently, and now has $50 billion in assets under
management, $30 billion of which pertains to the smart-beta
strategies that are Westpeak's specialty.
Data from the consulting firm Towers Watson show that
smart-beta strategies have beaten market-cap strategies by 0.9
to 2.1 percentage points, on average, since 1964. Institutional
investors allocated three times as many assets to smart beta
strategies in 2013 as they did the previous year, Towers Watson
said. Investment management firms ranging from Blackrock Inc
to WisdomTree have been developing smart-beta funds to
capture investor interest.
Goldman's Advanced Beta Strategies platform offers three
categories of products: those that aim for returns similar to
hedge funds, those that provide customized returns depending on
a client's investment objectives, and those that are focused on
Avanessians said Westpeak's products would appeal to
institutional clients that do not bet against stocks, and want
to have liquidity and transparency into index components.
(Reporting by Lauren Tara LaCapra; Editing by Bernard Orr)