Division of labor, specialization, and exchange are core concepts of economic science, and key to the wealth of nations, individuals, and firms. This was the critical insight early economist Adam Smith discovered in his 1776 inquiry, and the concepts are still playing out today, including in the field of alternative investments.
“Division of labor” is the process by which tasks are divided between actors, allowing specialization in what each nation, individual, or firm does best. But from there, economic actors do not operate in isolation – they engage in voluntary exchange for mutual benefit, and these age-old concepts can be observed in the recent strategic partnerships between Columbia Management and Blackstone Group, Apollo Global Asset Management and Ivy Funds, and – most recently – Apollo and OppenheimerFunds.
“Apollo Credit Management offers a wide range of alternative investment credit strategies that complement our strong in-house fixed income capabilities, which will help us continue to deliver a very compelling offering,” said OppenheimerFunds CEO Art Steinmetz, in a recent statement announcing a strategic partnership between the two firms. “We are launching our relationship via our marquee fixed income product, and will explore other potential initiatives over time.”
Under the new agreement, private-equity specialist Apollo will serve as a “sub-sub-advisor” to the Oppenheimer Global Strategic Income Fund (OPSIX)*, which is designed to provide current income from diversified sources of fixed-income investments, while maintaining low overall volatility compared to its benchmark. The strategic partnership will help the fund access non-traditional fixed-income market opportunities, including structured credit, middle-market loans, direct real estate investments, and insurance-linked securities, which should diversify the fund, improve risk-adjusted performance, and boost its yield.
The Oppenheimer Global Strategic Income Fund, which had $6.1 billion in assets under management as of June 30, could use Apollo’s help. Through August 31, the fund had one-year returns of -1.93%, according to Morningstar, ranking in the bottom half of funds in its category.
On Apollo’s end, the partnership helps advance co-founder Leon Black’s push to attract more capital from small investors. Back in February, Mr. Black said the company – which has traditionally catered to high-net-worth and institutional investors – is focusing “more and more” on individual investors, according to Bloomberg.
* OFI Global Asset Management, Inc. is the Fund’s investment adviser. OppenheimerFunds, Inc. is the Fund’s investment sub-adviser. Apollo Credit Management, LLC is the Fund’s Sub-Sub-Adviser.