Private equity pursues investment advisers for returns and fresh capital


When Apollo purchased Griffin, it was the latest in the line of the trend where a private equity firm purchases investment advisors.

Private equity firms are one of the largest custodians of institutional money in the world. These firms are buying up the companies who advise people on how to use their wealth i.e., the companies who attract the customers to the former.

According to the information from investment bank Echelon Partners, as of 2021, the number of such deals is at an all-time high of 223.

It is more than two-thirds of the total deals in 2020 and three times more than the deals made five years ago.

When Apollo acquires Griffin Capital, they will also acquire $5bn in actively managed closed-end funds. The deal also includes credit and real-estate funds and staff that advises numerous people on investment.

Similarly, KKR, Hellman & Friedman and TA Associates are also part of this trend. One of the specialities these advisory firms have is that it, has the highest number of customer stickiness or loyalty, on par with software companies.

In September, US SEC’s asset management committee in a report recommended allowing retail investors to invest in private fund strategies. That will enable wealth management clients to invest in the firms that are backing the advisory company.

In this deal, Apollo will not pick up any asset management company it can scale. At the same time, Griffin will also distribute the funds to another source of private equity assets, investment advisors and brokers.

In a presentation shown in October, Apollo declared their target to raise $50bn capital from the individual investors within five years. That segment accounts for 5% of the capital the firm raised between 2018 and 2020. The firm hopes to touch 30%.

It is a target to reach a market that is double the size of the institutional market, but it is always under-allocated by alternatives.

The firms are taking this way because the technology has simplified individual access towards the alternatives or specialized investments.

These members of private equity have recognised that the solution exists to help capture a marketplace that has evolved from opaque to all beneficiary segments.

From TA Associates’ investment in Caprock to KKR buying half of Beacon Pointe Advisors, there are a lot of prominent names in the list of deals made this year alone.

Aside from these direct investments, most of these deals are done by the portfolio companies owned by private equity. An example is Leonard Green-backed acquirer Mariner Wealth who announced their 9th acquisition this year.

It wouldn’t be wrong to say that most of the strategic acquirers are backed by famous private equity firms and more than one sponsor.

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