Alternative investments fintech iCapital is acquiring yet another firm’s alternative investment feed fund business.
The company announced that it would assume the management and operation of UBS Fund Advisor LLC, the wirehouse’s legacy proprietary U.S. alternative investment manager and feeder fund platform. The platform, also known as AlphaKeys Funds, represents $7 billion in client assets and includes private equity, hedge fund and real estate feeder funds. The purchase will bring the total assets that iCapital services to $136 billion.
Terms of the deal, which is expected to close in the second half, were not disclosed.
This is iCapital’s eighth acquisition of another firm’s alternatives business, said chairman and chief executive Lawrence Calcano. The New York City-based company acquired Stifel Financial Corp.’s alternative investment feeder fund platform in March.
While other deals represented a new relationship with a financial institution, this deal is unique in that iCapital has been building and managing new feeder funds for UBS since the wirehouse invested in the fintech in 2017, Calcano told InvestmentNews. UBS advisers already use iCapital’s technology, but now the older funds will be migrated to iCapital’s digital infrastructure.
“We’re going back and lifting out the legacy book and effectively marrying the two platforms together,” Calcano said. “For UBS, it will create one platform in which all of these [alternative] products will be managed … hopefully creating an even better adviser experience.”
Though iCapital is helping to replace a manual workflow with automation, that doesn’t mean anyone is losing their job, he added. The UBS team that manages the book will all join iCapital. “It’s about future growth, not about eliminating jobs today,” Calcano said.
A $497 million round of funding in 2021 valued iCapital at more than $6 billion, and the firm has deployed much of that to grow through M&A. The deal with UBS is iCapital’s 14th acquisition overall, with the most recent being its purchase of Simon Markets, a fintech providing advisers access to structured investments, annuities and risk-managed products.
While M&A has been a key element of iCapital’s growth, the deals have only been successful thanks to the company’s underlying organic growth, Calcano said. “We can make these acquisition and incorporate them because of the organic growth that is inherent and still significant in the business.”
UBS advisers will continue to serve clients that hold feeder funds as they have been without interruption.
UBS did not respond to a request for comment.
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