The Disruption in Asset Management Distribution: A Q&A discussion between Kudu Investment Management and Envestnet

The asset management industry, like so many of its counterparts, is going through severe disruption. Key to this change is distribution, and particularly the evolution from a sales-led to a marketing-led philosophy.

Three catalysts are behind this shift; technology, client demands, and value pricing, with technology playing an outsized role. The biggest disruptor to our industry in the past 30 years has been technology, or more specifically Google, which has changed everything by providing transparency into traditionally protected business models, client behavior and pricing. The result is increased pressure on strategy, structure, margins and organic growth.

In this Q&A, Kudu Investment Management managing partner Lee Beck and Envestnet | PMC group president James K. Patrick IV offer their perspectives on trends that are changing how asset management distribution operates. With asset manager margins under pressure and competition increasing, evolving distribution through disruption is a critical task.

FundFire reported that one large asset manager employs some 40 data scientists and software engineers at their technology center. They started the center last year to improve how the firm targets institutional prospects and advisors. How do you think increasing use of technology and artificial intelligence will disrupt asset management distribution?

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White Mountains Boosts Capital Commitment To Kudu

NEW YORK, Feb. 14, 2019 /PRNewswire/ — Kudu Investment Management, LLC, a leading provider of capital solutions to asset and wealth management firms, today announced that White Mountains Insurance Group, Ltd. (NYSE: WTM), a Bermuda-domiciled financial services holding company, has agreed to raise its commitment to Kudu to $250 million.

White Mountains has agreed to acquire the interests previously held by funds managed by Oaktree Capital Management, L.P. (“Oaktree”) and to assume Oaktree’s uncalled capital commitment.

“White Mountains is pleased with the progress made since our initial investment in Kudu last year. We are eager to augment our commitment to the Kudu team,” said Manning Rountree, CEO of White Mountains.

“White Mountains’ patient capital and ‘unlimited partners’ philosophy perfectly reflects Kudu’s own long-term approach to investments,” said Rob Jakacki, CEO of Kudu. “As such, we are delighted that White Mountains has increased its commitment to Kudu as we continue to provide flexible capital solutions to boutique managers.”

The transaction remains subject to customary closing conditions, including regulatory approval.

Early in 2018, Kudu secured a $250 million commitment from White Mountains and Oaktree. In recent months, Kudu has made several investments in specialist asset and wealth managers. The firm:

Acquired a minority stake in London-based alternative credit manager Fair Oaks Capital Ltd., which manages approximately $2.4 billion and specializes in collateralized loan obligations (CLOs) as well as direct investment in bank loans.
Provided minority permanent capital to TIG Advisors, LLC, an alternative investment management platform overseeing approximately $3 billion in assets.

Facilitated a management buyout for San Francisco-based wealth manager Bingham, Osborn & Scarborough, LLC. Worked with Tunbridge Partners to take a minority stake in Savanna, a fund manager that owns, operates and develops real estate in the New York City area.

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