(August 13, 2012)-West Coast private-equity firm Friedman Fleischer & Lowe has purchased a majority stake in Virginia-based Strategic Investment Group.
Strategic, an industry leader in the investment-outsourcing business with $28 billion in assets under management as of December 31, 2011, has long been thought to be looking to sell a stake in its business. The sale is effective as of July 31, 2012, aiCIO has learned.
Hilda Ochoa-Brillembourg, formerly of the World Bank pension fund, founded Strategic in 1987 along with other senior employees of the pension. The firm won aiCIO’s 2011 Industry Innovation Award for its work in the investment outsourcing space.
According to its submission to the 2012 aiCIO Investment Outsourcing Buyer’s Guide, the firm had full discretion over manager selection for 65% of its assets. At the time of the Guide’s publication in February 2012, Strategic had 57 clients. Corporate pension assets made up approximately 57% of the firm’s total assets under management; foundation assets made up 25%; public pension, endowment, and insurance general account assets made up the remainder.
The firm’s asset under management had doubled since 2007, with large growth seen in both the corporate pension and foundation sectors, according to its submission.
San Francisco-based Friedman Fleischer & Lowe was founded in 1997, closing its first fund of $333 million in 1999. It has since raised two other funds in 2004 ($811 million) and 2008 ($1.5 billion).
Investment outsourcing, surveys show, is a business with growing strategic importance among asset owners and asset managers. According to the 2012 aiCIO Investment Outsourcing Survey, lack of internal resources, additional fiduciary oversight, and better risk management are all leading to an increased demand for these services.
Among the firms participating in the Buyer’s Guide, assets under management where the outsourcing firm achieves “full discretion over manager selection” is up 283% since 2007.
Manhattan-based Kudu Advisors acted as the investment bank representing Strategic Investment Group in the deal. Kudu is led by Asset International founder and former CEO Charlie Ruffel. Asset International is the parent company of aiCIO.
Representatives of Strategic could not be reached at press time.