Aberdeen Standard Investments (ASI) and Gresham House are to team up to form a joint venture.
The joint venture will seek to grow funds under management and establish a new fund that employs a strategic public equity approach through applying private equity techniques, thorough due diligence and a long-term investment horizon primarily to smaller public, quoted companies that are perceived to be undervalued and could benefit from initiatives to increase their value.
The firms said completion of the joint venture, and the establishment of the new fund, will occur following the satisfaction or waiver of certain conditions.
ASI and Gresham House said that regulatory changes, such as MiFID II, have created a substantial investment opportunity, particularly for companies below £300m in market capitalisation, where market inefficiencies and valuation dislocations exist. In addition, they said they believed that an engaged approach using the principles and practices of private equity in terms of engagement and influence can achieve enhanced financial returns for investors.
The joint venture is intended to accelerate the growth of Gresham House's existing strategic public equity strategy led by Graham Bird and Tony Dalwood, which includes a 20-year investment track record, and combine it with the distribution expertise and reach of ASI. It will offer ASI clients valuable diversification into an area of the market that is increasingly difficult to access.
As part of the strategic partnership ASI has undertaken to subscribe for up to 1,309,598 new shares in Gresham House at 496p per share, which rank equally with all other shares, representing 5.0% of Gresham House's enlarged share capital.
Gresham House chief executive Tony Dalwood commented: "Like us, ASI understands the importance of specialist alternative investment strategies. The joint venture offers Gresham House access to a powerful distribution network and an industry-leading product development capability. The Strategic Public Equity investment approach is something I have been involved with since 2003 and we are delighted to have ASI as a shareholder in the process."
ASI global head of private markets Peter McKellar added: "The structural changes, liquidity issues and declining research coverage amongst smaller public quoted companies provides a long-term opportunity to generate significant investment returns for our clients.
"The establishment of this joint venture is in reaction to client demand for exposure to the increasing opportunities in strategic public equity. We identified Gresham House as a compelling joint venture partner based on a belief that working with a team with their experience, depth of resource and strong track record of Gresham House can deliver a compelling investment opportunity for clients."
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