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Rating:The GoodHarbor Folks Want to Buy F-Squared's Assets; Here's Why Not Rated 3.0 Email Routing List Email & Route  Print Print
Thursday, August 06, 2015

The GoodHarbor Folks Want to Buy F-Squared's Assets; Here's Why

Reported by Neil Anderson, Managing Editor

If all goes according to plan, later this month Broadmeadow Capital will buy the assets of beleaguered ETF strategist F-Squared. The CEO of Broadmeadow's parent company, Cedar Capital, explained the deal to MFWire.

"It made a lot of sense to bring the F-Squared assets into Broadmeadow," says Paul Ingersoll, CEO of Cedar. "It was obvious that they really look at many of the same things in the same way. They both have a presence in Boston."

Cedar is not new to the ETF strategist space. It grew out of ETF strategist GoodHarbor. As GoodHarbor grew, Ingersoll says, they built out their marketing, distribution, and compliance efforts.

"We realized that those functions were highly leverageable," Ingersoll says. "We decided to use those functions and partner with other asset managers. We separated the operations functions of GoodHarbor away from the portfolio management."

And thus, with help from private equity, was Cedar Capital born.

Beyond GoodHarbor, Cedar has bought a stake in River North and taken over its distribution. Cedar also offers its own Leland Funds (which are subadvised by folks outside the Cedar family), and they're partnering with Innovator on an ETF. And last year the Broadmeadow folks started their shop and joined the Cedar family.

"I knew and respected them," Ingersoll says. "I made a pitch to them: join us and create a subsidiary under the Cedar Capital umbrella. They did that."

As for F-Squared, Ingersoll estimates that the deal will go through within two days of the sale order of the bankruptcy court, which is expected later this month.

"It's an asset purchase. We're not buying the entity," Ingersoll says. "We're buying the intellectual property that represents the strategies that F-Squared offers," as well as the right to step into F-Squared's investment management contracts.

"It's our goal to offer the strategies in identical form ... with complete continuity for those investors ... who have hung with F-Squared through all the things they've been through," Ingersoll says.

"We're bringing over all of the key investment people and portfolio managers from F-Squared, along with the key relationship management people," Ingersoll adds, estimating that about 12 F-Squared folks will join Broadmeadow once the deal closes. "We do have commitments from all of the people that we think are key to managing the assets going forward."

F-Squared's AlphaSector product brand will continue, Ingersoll says, but the F-Squared brand will not.

The terms of the deal, Ingersoll says, "are actually variable." The earnout will depend on how much of F-Squared's assets move over to Broadmeadow and on how much the old F-Squared business grows once the deal is done. 

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