MutualFundWire.com: F-Squared Finds a Buyer, Files Chapter 11

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Wednesday, July 8, 2015

F-Squared Finds a Buyer, Files Chapter 11

Laura Dagan has found a buyer for F-Squared, even as the beleaguered ETF strategist files for a reorganization bankruptcy.

David Cabot
Broadmeadow Capital
President, Co-Founder

Today Wellesley, Massachusetts-based F-Squared Investments filed voluntary chapter 11 petitions in the U.S. Bankruptcy Court for the District of Delaware and revealed an asset purchase agreement that would entail Broadmeadow Capital buying F-Squared's intellectual property, investment strategies, "and substantially all of the investment contracts."

A statement from F-Squared explains how the process will work:

Eric Biegeleisen
Broadmeadow Capital
Chief Investment Officer

The proposed agreement with Broadmeadow Capital contemplates a Court-supervised auction process, which is designed to achieve the highest or otherwise best offer for the Company's assets. The agreement with Broadmeadow Capital sets the floor, or minimum acceptable bid, and is subject to Bankruptcy Court approval and certain other conditions. A final sale approval hearing is anticipated to take place shortly after the auction with the anticipated closing contingent on the approval of the Court and the consent of F-Squared’s clients.

Broadmeadow is a quantitative asset manager led by David Cabot and Eric Biegeleisen. Biegeleisen and Cabot previously held top positions at another ETF strategist, Boston-based, Windhaven Investments, which Schwab bought for $150 million in 2010.

Broadmeadow is a subsidiary of Cedar Capital, which is in turn backed by private equity firms FTV Capital and LLR Partners.

Paul Ingersoll, CEO of Cedar Capital, states that the deal "reinforces Cedar Capital's position as a single point of access to innovative investment strategies well suited to evolving market dynamics."

"Once completed, the acquisition will provider for uninterrupted service under the leadership of the Broadmeadow Capital team, supported by Cedar Capital's robust operating infrastructure," Ingersoll states.

"We see merit in the AlphaSector investment strategies and metholodogies [F-Squared's flagship product suite], despite how their performance track record prior to 2009 was portrayed to investors," Cabot states.

Dagan confirms that at least part of the F-Squared team would join Broadmeadow as part of the deal.

"Broadmeadow Capital shares AlphaSector strategies' research-driven quantitative investment approach," states Dagan, CEO of F-Squared. "Broadmeadow Capital will preserve the continuity of certain F-Squared employees, including investment, research and client relationship professionals, who will join Broadmeadow Capital in connection with the transaction."

News of F-Squared being on the block, with PL Advisors helping with the sale, broke in April, after a tough half-year at the formerly high-flying ETF strategist that was once the biggest in the business. Eight months earlier F-Squared revealed that it had received a Wells notice from the SEC over performance reporting issues for F-Squared's flagship AlphaSector indexes. F-Squared's founding CEO, Howard Present, was replaced by Dagan, and F-Squared (but not Present) settled with the SEC to the tune of $35 million.

Printed from: MFWire.com/story.asp?s=52173

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