iM Global has taken a stake in a top-performing equity business, as it looks to put its remaining $400 million to work

Meghan Morris

Apr 22, 2019, 18:30 IST

iM Global has taken a stake in a top-performing equity business, as it looks to put its remaining $400 million to work

iM Global Partner

Jeff Seeley, deputy CEO of iM Global Partner.

Investment firm iM Global Partner is buying a 40% stake in Scharf Investments, one of iM Global's executives told Business Insider.
The California equity manager, which now oversees $3.4 billion, has quintupled in size since 2007.
The deal comes amid a hot time for M&A in asset management, with deal value up 72% last year, according to PwC.
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iM Global Partner, an investment firm that buys minority stakes in asset managers, has inked its latest deal, an executive told Business Insider.

The Philadelphia-based firm is buying a 40% stake in Scharf Investments, a Scotts Valley, California-based equity manager. The price of the all-cash deal was not disclosed.

Including this transaction, iM Global has now spent $200 million on its five minority interest acquisitions. The firm has another $350 million to $400 million to deploy from its four French investors, which include Amundi. Jeff Seeley, the firm's deputy chief executive officer, told Business Insider his team will likely to do one more deal this year.

See more: Neuberger Berman's Dyal buys minority stake in hedge fund Atalaya

Overall, asset management M&A has been strong: last year saw 140 deals - up 5% year-over-year - for a total volume of $14.9 billion, according to PwC. That volume jumped 72% from 2017, largely buoyed by four big deals, including Invesco's $5.7 billion acquisition of OppenheimerFunds.

"We believe there is much more activity to come and more deals to be consummated given both the fundamentals and challenges across the sector," the PwC report said.

The iM Global model is similar to that of Affiliated Managers Group, which Seeley left last March after 16 years.

"We're different from private equity - we're not looking to make an investment today and look for an exit strategy in five years," Seeley said. "We're long-term, permanent partners ... We're not looking to disrupt the culture or the people; we're looking to complement their efforts on the compliance, distribution and marketing sides."

Scharf, founded in 1983, has more than quintupled its assets since 2007. Seeley said iM Global will help the firm continue expanding, particularly in its institutional and high net worth advisory segments, by connecting Scharf's team with iM Global's distribution team.

Scharf's flagship mutual fund for individual investors, which has just under $400 million, lost 3.4% last year. It still performed better than the S&P 500 in 2018, which lost 4.4%, and comparable funds, which were down 6.3%, according to Morningstar. In the last three years, the fund has underperformed the S&P 500 but is still in the top 3% of comparable funds, per Morningstar.

"We had a reminder that the markets can go down in 2018. Scharf historically is a manager that does very well protecting clients' assets," Seeley said. "Sometimes it's about what you don't lose and what you can preserve in a period of volatility like last year."

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