, Investment Manager
Apollo Global Management, LLC
) is set to vend its stake in Lighthouse Investment Partners LLC,
the fund-of-hedge-funds manager. Notably, Australian asset
manager - HFA Holdings Ltd. is the owner of Lighthouse.
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Impressed by Lighthouse's management team and its business
strategies, Apollo Global invested in Lighthouse in 2010, adding
a new product line to its assortment of offerings. However,
difference of opinion over stratagem and Lighthouse's
disappointing performance impelled Apollo to exit the fund.
Over the last three years, Lighthouse has disappointed with its
top-line performance and took initiatives to reduce investment
management costs to aid bottom-line expansion. However, HFA's
holding that gains around 90% of its net operating income from
Lighthouse recorded flat income in the three years since Apollo's
investment in 2010.
Therefore, followed by Apollo Global's exit, HFA Holdings is
chalking an outright sale of Lighthouse. Established in 1998, HFA
provides absolute return fund products to retail investors in
Australia and was listed on the Australian stock exchange in
2006. Notably, in 2008, HFA acquired Lighthouse for $674.5
million and has over $7 billion of AUM out of $8 billion managed
by Lighthouse, as of Sep 30, 2013.
According to the 2011 regulatory filing, as per terms of the
agreement, Apollo and a co-investor, the South Carolina
Retirement System, got $75 million in HFA notes convertible at
97.66 cents ($A1.1) per share, which equaled 39.6% stake in HFA.
Further, the investors received 31.25 million share options at an
exercisable price of A$8 per share. Following the deal, Apollo
Global distributed the investment products and services of
On the other hand, Lighthouse which specializes in offering
personalized managed accounts to investors that pulls together
individual hedge fund portfolios, enhanced Apollo's private
equity, credit and real estate offerings, making it a competitor
The Blackstone Group L.P.
) BAAM and
Kohlberg Kravis Roberts & Co. L.P.
Notably, Apollo Global's assets under management (AUM) more than
doubled since its investment in HFA. As of Sep 30, 2013, Apollo
has AUM of $112.7 billion, including $59.4 billion in credit,
$42.8 billion in private equity, and $9.3 billion in real estate.
However, certain disagreements between Apollo Global and
Lighthouse and the overall dismal performance of the latter led
to the end of this alliance.
We believe that the robust performance of Apollo Global's
investment portfolios, particularly its private equity segment,
will drive growth going forward. Moreover, the company's strong
liquidity position and consistent fund raising ability indicate
increased capital deployment activities in the forthcoming
quarters. Currently, Apollo Global carries a Zacks Rank #3
(Hold). A better-ranked stock in the same sector includes
Artisan Partners Asset Management Inc.
) with a Zacks Rank #1 (Strong Buy).