NEW YORK (Reuters) - Investment firm iM Global Partner bought a stake in Dynamic Beta investments, a U.S. firm that tries to duplicate large hedge funds’ strategies but for far lower fees.
Paris-based iM Global Partner, which provides distribution and regulatory support to boutique investment firms, now owns 45 percent of New York-based Dynamic Beta, which recently changed its name from Beachhead Capital, the two companies said on Thursday.
For iM Global the acquisition marks a deeper push into the U.S. market while it offers Dynamic Beta access to potential investors as appetite for alternative assets is growing.
Worried that traditional stock and bond portfolios will not be able to secure returns needed for retirement, all types of investors are clamoring for alternatives that promise to earn them more but charge less than hedge funds.
Hedge funds often require a minimum investment of $1 million, collect fees that equal 20 percent of the profits, and have delivered lackluster returns in the last five years, largely lagging the stock market’s strong gains.
Over the years, demand for portfolios that try to imitate hedge funds has picked up, prompting investment firms from Blackstone Group to Goldman Sachs to create a range of products from liquid alternatives, which allow investors to withdraw their money daily, to replication funds.
Dynamic Beta has offered its portfolios for 11 years, allowing investors with as little as $10,000 to invest, and says it has outperformed hedge funds by one third over that time.
“Since 2007, we have demonstrated that we can deliver the diversification benefits of hedge funds without high fees, gating/suspension risk, and single manager risk,” said Andrew Beer, Dynamic Beta’s managing director.
Dynamic Beta’s 11 year track record appealed to iM Global’s taste for firms that have long performance histories. In July, iM Global bought a piece of Boston-based hedge fund firm Sirios Capital and previously it invested in Polen Capital, based in Boca Raton, Florida, and Dolan McEniry Capital Management, a Chicago-based corporate bond manager.
A number of investment firms, including Affiliated Managers, specialize in buying stakes in investment management firms to help them broaden their appeal to investors.
Reporting by Svea Herbst-Bayliss; Editing by Phil Berlowitz