GAM To Buy Quant Manager Cantab in $290M Deal

Jun 29 2016 | 8:31pm ET

Systematic alternative asset manager Cantab Capital Partners has agreed to be acquired by Swiss-based global money manager GAM in a deal worth an estimated $292 million, illustrating the continued interest in quantitative investment approaches. 

The acquisition expands GAM’s offering of quantitative investment funds and will form the cornerstone of GAM Systematic, a new unit that will offer computer-driven products and solutions across liquid alternatives and long-only traditional asset classes including equities, debt and multi-asset strategies. 

The transaction is expected to close in the second half of this year, pending customary regulatory approvals and closing conditions. 

U.K.-based Cantab was founded in 2006 and manages approximately $4 billion for a sophisticated and diversified global client base. GAM, meanwhile, is headquartered in Zürich and is one of the largest independent active investment managers in the world, with AUM of approximately $120 billion.

Consideration for the deal consists of an upfront cash payment of $217 million, funded from GAM's existing cash resources, and deferred consideration based on future management fee revenues, according to GAM. Deferred consideration will be based on management fee revenues from the strategies managed by the Cantab team for 2018, 2019 and 2020, payable after each period end. Based on 2015 management fee revenues, the deferred consideration would total approximately $75 million, bringing the total estimated consideration to $292 million. 

Following close of the acquisition, Cantab’s 56 employees, led by Cantab founder and CIO Dr. Ewan Kirk, will join GAM. They will remain based in Cambridge, while Cantab’s partners will be retaining current investments and re-investing the majority of net proceeds from the transaction into Cantab funds on a multi-year basis. They will also be signing multi-year employment contracts with GAM, Cantab said in a statement. 

 “We are excited to be embarking on a new phase in the ongoing development of Cantab,” Kirk commented in the statement. “GAM is a world-class asset manager with strong global distribution and both our clients and the firm will benefit from this transaction. For the partners and employees of Cantab, the key component of this transaction is that GAM is fully supportive of our desire to retain our unique culture and our proximity to the intellectual, technology and innovation hub of Cambridge.  

“Cantab is the perfect partner to enable our move into the growing systematic space,” added Alexander Friedman, GAM’s Group CEO.  “Their focus on combining science with cutting-edge technology, together with the firm’s distinctive research culture, makes them the ideal cornerstone of the GAM Systematic offering.”

GAM, which is listed on the Swiss stock exchange, expects the acquisition of Cantab to be significantly accretive to it’s underlying earnings per share in the first full year of ownership. The firm is the industry's third-biggest provider of liquid alternative UCITS funds, both in terms of assets and number of products, and will promote the new systematic products through its distribution team of more than 80 relationship managers serving institutional and intermediary clients globally.

"The market turmoil following the UK referendum last week has only reinforced our determination to pursue, and deliver on, our strategy of diversification and long-term growth,” continued Friedman. “In Cantab, we are acquiring industry-leading intellectual capital, a highly distinguished decade-long investment performance track record, and a profitable and scalable business.”

Shortly after the transaction is closed, a UCITS version of the existing core macro product and a new non-directional global equity strategy – both based on Cantab's current investment processes – are planned as part of GAM Systematic, according to the statement. 

Future strategies will span traditional and alternative asset classes in different product vehicles including UCITS, onshore and offshore funds. 

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