A 104-year-old, employee-owned, Midwestern financial services firm is betting on a $4-billion-AUM (as of June 30), five-mutual-fund, 40-employee liquid alts shop near Minneapolis.
| Kevin Michael Kinzie|
Octavus Group, LoCorr Fund Management, LoCorr Distributors
Yesterday, Kevin Kinzie
, founder and CEO
of Octavus Group
(parent of LoCorr Funds
has purchased a minority stake in Octavus. Kinzie confirms that the deal closed on August 28 and that Milwaukee-based Baird now owns a minority stake (under 25 percent) in Excelsior, Minnesota-based Octavus. Watch for the Baird team to increase their bet on Octavus down the line.
Pricing and terms of the deal have not been publicly disclosed. Yet Kinzie (who founded Octavus in 2003 and launched LoCorr in 2011) confirms that he remains Octavus' single biggest shareholder and that Octavus' other shareholders (besides Baird) are "primarily current employees."
"Baird purchased its Octavus stake from a combination of outside investors and the firm's founder," Kinzie tells MFWire
"We are very pleased to be making this investment, which is part of Baird's strategy of making minority equity investments in third-party financial services firms that offer products and services which complement Baird's own capabilities," a Baird spokesperson tells MFWire
in an emailed statement.
Distribution appears to be a key factor in the new strategic partnership between Baird and Octavus. Indeed, Kinzie notes that Baird has been "a key distribution platform for LoCorr Funds for many years."
"We envision a seamless collaboration that will amplify our current market presence and elevate our wealth management capabilities," Kinzie states. "The fusion of our organizations' strengths opens doors to greater market penetration, specialized expertise, innovative product development, and expansion across product lines and distribution channels."
"The demand for low-correlating solutions from financial advisors seeking the benefits of true diversification in client portfolios has never been greater. With continued uncertainty amid instability across financial markets, investors have been forced to rethink the 60/40 traditional portfolio and consider a significant allocation to low-correlating solutions, which offer the potential to reduce risk and enhance returns," Kinzie writes. "At LoCorr, this has been our expertise for the past decade. Both Baird and LoCorr believe the growth in liquid alternatives will continue to accelerate over the next decade."
As part of the deal, Octavus' board of directors is expanding by two (to five seats in total), with both new spots going to Baird. And, though Baird also has asset management business (with its own mutual funds
), both new Octavus board seats will be filled by leaders from the wealth management space; a Baird spokesperson confirms that Mike Schroeder
(chairman of Baird's private wealth management arm) and John Taft
(vice chair of Baird and former CEO of RBC Wealth Management) will join Octavus' board.
"We see tremendous opportunity in the marketplace for education about low-correlating strategies and their role in portfolios," Kinzie writes. "We will continue to provide this education and remain committed to offering best-in-class investment solutions to deliver returns independent of traditional asset classes, like equities and fixed income."
Looking ahead, Kinzie confirms that Baird has an option to increase its Octavus stake down the line.
"The intent is for Baird to increase their investment over time, but to remain a minority owner," Kinzie writes.
Editor's Note: A prior version of this story gave the wrong size of Baird's stake in Octavus. To confirm, Baird now owns a minority stake that is less than 25 percent of Octavus. Also, a prior version of this misattributed Kinzie's remarks to a colleague who sent those remarks to MFWire.
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