In the latest of a string of recent alts-industry M&A deals, leading global asset manager KKR announced a new strategic partnership with liquid alternatives specialist Marshall Wace. Under the terms of the agreement, KKR will take a 24.9% stake in Marshall Wace, paid for through a combination of cash and stock, and the firms will have the option of expanding KKR’s stake to as much as 39.9% over time.
“We believe Marshall Wace has built a premier franchise within the liquid alternatives space, and the firm has an entrepreneurial DNA and a culture that is similar to KKR’s,” said Scott Nuttall, KKR’s Head of Global Capital and Asset Management, in a recent statement. “This is an important step for both of our firms and the beginning of a long-term partnership.”
Focus on Long/Short Equity
Marshall Wace was founded in 1997 by Paul Marshall and Ian Wace, and it has grown its assets under management (“AUM”) to more than $22 billion as of August 1, 2015. The majority of those assets are invested in long/short equity strategies. Marshall Wace has a 17-year track record of delivering attractive risk-adjusted returns with low correlation to the broad stock and bond markets. The firm also has a peer-to-peer lending business called MW Eaglewood.
“Over the last few years, we have been approached by several firms looking to invest in our business, but KKR offered something different: a true, long-term partnership,” said Marshall Wace CEO Ian Wace. “While our core operations and investment process will not change, we believe we will be able to build on the complementary relationships and skills of both firms to meet our clients’ evolving investment requirements.”
The deal is expected to close later this year. Upon its finalization, Marshall Wace will continue to operate its business independently. The transaction is expected to be immediately accretive to KKR’s after-tax earnings, as virtually all of Marshall Wace’s $22 billion in AUM are subject to management and incentive fees.
KKR, which has over $100 billion in AUM, isn’t alone among major asset managers tying up with small alts firms. Its rival Carlyle Group has made acquisitions over the past five years, including several hedge funds, according to Bloomberg. KKR undoubtedly hopes it can avoid Carlyle’s pitfalls, as the New York Times recently characterized Carlyle’s hedge fund investments as “hazardous.”