Salient Partners—best known for its outsourced-CIO (OCIO) and risk parity offerings—has inked a deal to purchase liquid alternatives specialist Forward Management.
The deal will add roughly $5.5 billion to Salient’s $21.5 billion under management, which will continue to be led by acquiring firm CIO Lee Partridge.
“OCIO isn’t the main focus of the business right now.” —Lee Partridge, SalientCurrently, OCIO assets account for roughly half of Salient’s investor capital, while ’40 Act structures—including mutual funds and liquid alternatives in other vehicles—represent $4 billion. Adding Forward’s assets would tip this balance towards Salient’s long-term strategic plan.
“OCIO isn’t the main focus of the business right now,” Partridge told CIO. “Our focus is more on the investment management side. The vision is to have $50 billion in assets under management over the next five years, representing a nice mix of about 50% mutual funds and 50% separately managed accounts and institutional comingled funds.” That half-and-half weighting, he continued, “is indicative of the desired retail/institutional mix going forward.”
Not only does institutional money dominate Salient’s business at the moment, but nearly half of its assets under management belong to one client: the $10.5 billion, wholly-outsourced San Diego County Employees Retirement System. Amid much internal strife, the board has begun searching for an internal CIO.
The Salient-Forward marriage would both take advantage of the unstoppable shift from defined benefit retirement plans to defined contribution, Partridge said, and the companies’ natural cohesion.
“We’ve been talking to Forward off and on for the last four or five years,” the CIO explained. “It’s a very complementary transaction that gives us a lot of scale and growth potential.”
Salient’s staff will grow by roughly 100 members to upwards of 250, including more than 50 sales people. According to Partridge, Forward’s key investment professionals have signed on to stay following the transition, and will continue to work out of their San Francisco offices.
A definitive purchase agreement has been reached, and the transaction is expected to close in the second quarter of this year.
Related Content: San Diego’s Bumpy Transition from OCIO; The Many Tensions of Outsourcing