Aperture Investors
- Aperture Investors is a new fund in the asset management space which is looking to offer a markedly different model to a crowded market.
- Led by former Alliance Bernstein head, Peter Kraus, Aperture will charge ETF-like fees with managers of its funds only able to earn higher fees if they beat outperformance targets.
- Aperture is backed by Assicurazioni Generali and is set to launch another fund, based in London, in the coming weeks.
Active investors are getting squeezed.
A combination of poor performance and fee pressure resulting from the rise of passive funds has the industry questioning the value of these highly paid asset managers.
Aperture Investors, the brainchild of former AllianceBernstein CEO and Goldman Sachs executive Peter Kraus, has responded by offering a completely different model to investors. Having been somewhat summarily sacked as a board member of AB in 2017 with a payout of a cool $99 million, Kraus’ time could have been spent building his already impressive contemporary art collection.
Instead he set out to build a performance-based asset manager with a new model. The asset manager is backed by Italian insurance and asset management giant Assicurazioni Generali, which has backed Kraus’ vision with up to $4 billion as strategic investment capital for individual strategies subject to board approval.
"Asset management is an industry long overdue for disruption," Kraus, chairman and CEO of Aperture Investors, told Business Insider. "After over three decades in asset management, I can confidently say there are too many active managers managing too much money."
How much? $84 trillion in assets, according to Aperture’s own estimates.
Aperture was launched at the tail end of 2018 and arrived at a time of increased index tracking both via passive funds but also active managers taking higher fees while also tracking indices for the most part, according to Financial Times reporting. A "feemageddon" of investors cutting fees to win clients while still effectively index tracking has become a trend in recent years.
Aperture says its fee structure is a major departure from the usual model in asset management which sees funds receive fixed fees for their performance. Aperture will only be paid for generating outperformance with modest base salaries compensated by higher fees if benchmarks are beaten.
The asset manager recently launched an emerging markets fund, the Aperture New World Opportunities Fund. The fund is led by Peter Marber, a professor at a variety of top universities and a former investor at UBS and HSBC, in New York and will look to exploit opportunities in over 56 countries across equities, bonds, and FX. The fund currently has $352 million in assets under management and as of the end of April is down 1.1% against its benchmark.
"We opportunistically seek both long and short positions to help build an all-weather fund," Marber told Business Insider. "Not all countries manage themselves well. Betting against some emerging market countries can sometimes offer interesting risk/reward opportunities."
Marber said that populist governments, for example, can lead to loose fiscal spending and accommodative central banks. This, in turn, may lead to higher inflation and opportunities to short local currencies and bonds.
Aperture will charge a flat 0.4% management fee, something it says is broadly competitive with passive ETFs in emerging market fixed income, for hitting its benchmark or underperformance. However, when managers beat specific outperformance targets Aperture can charge a 30% performance-linked fee on returns which are in excess of the fund’s benchmark.
"The Aperture strategy is superior to the current three philosophies in asset management. ETFs often underperform benchmarks net of fees, active managers are struggling to outperform regularly, and hedge funds have become very expensive for what are largely beta returns," Marber said. "Our model has legs because investors receive beta for an ETF price and outperformance as a free option."
Aperture is also set to launch a fund based out of London this summer, headed up by Simon Thorp, an experienced fixed income trader who was previously a director at KKR. The opportunity to start a fund "from a standing start" was an exciting proposition, Thorp told Business Insider.
"The market was ready for this kind of strategic investor and rather than disrupt I think we are looking to differentiate ourselves within this space and the timing is spot on," he said. "The world is run by long only funds 99% of the time which means they get money in great swathes which is then redeemed in great swathes whereas we can be more opportunistic."
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Source: Business Insider – cburroughs@businessinsider.com (Callum Burroughs)