Gartmore is increasing its slant towards hedge funds with the acquisition of Riverview International Group in the US.
Riverview is a specialist hedge fund of funds business in New Jersey. Gartmore has bought out 100% of the business but will not say for how much.
The acquisition follows on from Gartmore's increasing concentration on alternative investments since 1999 when it launched its first hedge fund, the AlphaGen Capella, under Roger Guy.
The AlphaGen umbrella now has seven funds with $2 billion in assets under management. This figure is still a small share of its overall assets of £53 billion but the Riverview acquisition shows where Gartmore sees its future. This is quite a reinvention from the mid to late 1990s when it put a lot of effort into passive management as its traditional institutional business struggled to produce strong returns. The index-tracking business has since been sold to State Street.
Glyn Jones, chief executive of Gartmore, says its institutional and retail clients are increasingly interested in hedge funds. "This business adds an exciting new capability to the range of services we can offer to our clients," he says.
Riverview has $350 million of assets under management - mainly with institutional clients. The business was established in 1999 and its flagship Market Neutral hedge fund of funds product has produced a 13% annualized return since it started.
Despite being rebranded as Gartmore Riverview, the business will retain a degree of independence from its parent. Its four founding board members will continue to run the business but will be joined by Gartmore's Jones and Paul Hondros on the board of directors, which also includes as an investment adviser Harry Markowitz, pioneer of modern portfolio theory.
Derry Guy, a managing director of Riverview, says Gartmore is a natural fit. "They bring us global distribution, a strong brand and a first-class reputation," he says. "They share our enthusiasm for hedge fund investing."
Gartmore was bought by National Mutual Insurance in 2000. The insurance group, the sixth-largest life insurer in the US, has $117 billion in assets.