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Spotting Market Gaps And Other Opportunities At Alumia

WealthBriefing: News Insight Intelligence

Date:  15 March 2024

Tom Burroughes, Group Editor

  • We talk to a firm working with a large Germany-based investments group, and other businesses, about its approach to helping boutiques and others gain traction in the funds market.

    Words such as “partnership” and “alignment” get thrown around in wealth management. That’s unsurprising. If the 2008 financial crash taught lessons, one was that a close fit between the interests of investors and those running firms was essential to avoid blow-ups later.

    At Alumia, an organisation that provides distribution and other services to Frankfurt-headquartered Universal Investment (see this interview), and others, it offers white-label solutions and helps boutiques in the investment world to gain traction in the market. It also provides fund management structures and helps boutiques to raise money outside their home turf. Clients include family offices, pension funds, endowments, private banks and fund of funds.

    Universal Investment is Alumia’s strategic shareholder. Alumia’s partners are Sissener; Mandatum, East Capital, and Armen.  

    The key term for this business is “co-investment,” David Saab, chief executive and founding partner, Alumia, told this publication in a recent call. “We are looking at assets that are not likely to be in ETFs or some huge private equity platform. We are not shy of the more niche kinds of strategies.” 

    There’s news in the pipeline: “We are very excited to partner with two new managers; a high quality specialist equity manager with specialisation in Japan and India and a multi-asset investment specialist. The official details of these new partnerships will be announced by the summer of 2024,” Saab said. 

    A sense of partnership with the firms and people who invest with Alumia came across as Saab described its business.

    “One of the key strengths [of Alumia] is the ability to identify gaps in the market and to source unique solutions capable of generating long-lasting value creation and mitigating investment risks for the clients. In addition to serving as investment advisors, Alumia supports clients in growing their businesses through Alumia’s network, capital introductions and co-investing alongside them,” Saab said.

    “We are primarily operating in French-speaking Europe (France, Belgium, Luxembourg, Monaco), as well as other selected markets, such as Holland, Scandinavia, the UK, and Switzerland where we serve both the French and German parts. We see huge opportunities in serving those markets and we are hiring the right people and building a network to be able to meet our clients’ objectives,” Saab said. 

    “The biggest challenge our clients are facing is getting access to the the right investment products for various reasons such as lack of experience in investment selection and due diligence or non-personalised investment allocations through large institutions,” he continued. “Alumia also supports asset managers in growing their business through Alumia’s network, business partners, capital introductions and advisory. This involves assisting asset managers in buiding the right products, in the most desirable structure to enable them to access multiple jurisdictions and be successful. Our joint venture with Universal Investment enhances fund servicing by bridging asset managers and investors independently and impartially.” 

    His comments touch on a matter this news service recently touched upon – how to negotiate the vast universe of funds, both new entities and those being launched.

    Investment approach
    WealthBriefing asked Saab what is Alumia’s investment philosophy. 

    “Our overarching theme is identifying diversifiers to a traditional 60/40 equity/bond investment portfolio. As we go through 2024, our market outlook is very much focused on an environment with interest rates higher for longer, along with sticky inflation that stays elevated due to structural reasons,” Saab said. “Therefore, we currently favour investment strategies that are less sensitive to volatility in interest rates and can still produce a steady return, such as in senior loans and in the private credit space.”

    Saab brings two decades of industry experience to the role. He has worked in private banking and asset management JP MorganEdmond de Rothschild, and was a co-founder at Aperture Investors, an asset manager backed by Generali Investments.

    Reflecting on his time at Aperture and other firms, Saab said: “Most importantly, I have learned that it is critical to identify the gaps and weaknesses of our industry when it comes to servicing a broad range of sophisticated clients, including family offices, banks, insurance companies, pension funds and endowments.”

    This news service asked Saab what challenges he thought existed for operators of various funds to get in front of private banks and other potential buyers of funds?  

    “Getting in front of private banks and potential funds has become increasingly challenging over time. The main obstacle stems from regulatory constraints, preventing platforms from investing in strategies lacking a substantial track record or a certain asset size. This poses a significant barrier for boutique asset managers operating in smaller markets. Despite their expertise and proficiency in niche asset classes or less-known markets, they find themselves inaccessible due to these hurdles,” he said.

    “During my time at JP Morgan, I had identified a new market opportunity that had emerged. We invested in a fund with less than a three-month track record. Not only did that strategy deliver an impressive performance, it also successfully grew to roughly €3 billion ($3.27 billion) in a very short period. In today’s world, this opportunity would be missed. 

    “Brand visibility is another barrier we see in the market these days. Many fund buyers are reluctant to invest in asset managers they haven’t worked with in the past. This requires an additional level of firm due diligence and ongoing monitoring that might be considered not worth the time and effort, even with the potential benefits of the additional alpha or diversification effect,” he said. 

    Wins and obstacles
    WB asked Saab about its successes and obstacles so far.

    “Our biggest success has been to build an experienced international team which operates under a MiFID regulated framework, in order to provide clients with access to high quality investment solutions. Our investment advisory business has been able to serve our asset management clients by helping them access new markets and growing their businesses while, at the same time, our institutional clients and family offices, through our outsourced-CIO business, have benefitted from the access to differentiated investment opportunities. 

    “Most recently, we successfully raised €25 million for the launch of the first impact startup studio dedicated to AgriTech, an initiative that was also backed by the French public investment bank, which shows Alumia’s credibility and capacity to work with mature partners.

    “Our greatest hurdle, both for our company and our industry as a whole, lies in swiftly embracing innovation. Although there is a clear appetite among financial institutions, especially asset managers and institutional investors, to adapt to the rapidly-evolving landscape, integrating technology and undergoing digital transformation has proven to be a significant challenge. The complexity of infrastructure and regulatory policies stand out as the primary barriers hindering progress.”

    (Bruce Weatherill, non-executive chairman of Alumia, is also chairman of ClearView Financial Media, publisher of this news service.)