October 25, 2010

Purchase of Altegris Answers Genworth Advisors’ Call for Alternatives

Genworth wealth management platform to add managed futures, hedge funds for RIAs and BD reps

“It was like a hand in glove,” explains Gurinder Ahluwalia in describing Genworth’s assessment of Altegris, the alternative investments provider that Genworth announced Oct. 19 it would acquire for $35 million. Once the advisors—mostly RIAs and independent broker-dealer reps—who use Genworth Financial Wealth Management’s (GWFM’s) platform voiced a clear need for giving their clients access to alternative investments, Genworth’s due diligence search for an alternatives provider led it to Altegris.

“About 18 months ago,” Ahluwalia, CEO of GFWM, said in an interview on Oct. 21, “our clients gave us the feedback that while they loved our platform, they needed alternatives. So we started identifying managers we could work with,”and Altegris came to fit the bill, since its “people, culture and values were the same as ours.”

Most important to Ahluwalia, Altegris’s and GWFM’s business philosophy were the same, noting that “rarely in life do all these match up so well.” Ahluwalia said, “We’re an open architecture shop,” like Altegris, said Ahluwalia, but Altegris’s products are based on the work of a “phenomenal” research team, built on the firm’s integrity and attention to risk management.

(One of the members of that research team, Altegris’s Matt Osborne, blogs on managed futures for AdvisorOne.com.)

After the acquisition, which Ahluwalia says is expected to close by year-end, “Altegris will remain a separate brand with its leadership intact, and while GWFM-affiliated advisors will then gain access to Altegris’s managed futures and hedge fund products, Ahluwalia said there might well be other alternative investing vehicles that will be rolled out.

(An article by Rydex AdvisorBenchmarking Maya Ivanova in Investment Advisor’s October 2010 issue confirmed advisors’ growing interest in alternative investments.)

The typical advisor on the GWFM platform has between $50 million and $150 million in assets under management, said Ahluwalia, and they’re comfortable outsourcing their money management to GWFM, while the advisors concentrate on serving their clients.

Are those advisors’ interest in alternatives due to a desire for extra alpha? No, says Ahluwalia, “it’s all about gaining exposure to a non-correlated asset class” through managed futures, currencies and commodities. “Our advisors have a voracious appetite for growth,” he said, but those alternatives only account for a 5% to 10% allocation of clients’ portfolio.

Now, says Ahluwalia, we have “work to do with our broker-dealer partners” to bring Altegris’s alternative products onto the BDs’ approved lists, but believes Altegris’s “established brand and name,” matched with GWFM’s “good relationships” with independent BDs will ease those discussions.

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