(Bloomberg) -- GAM Holding agreed to buy Cantab Capital Partners for $217 million in cash and deferred payments after spending 18 months weighing the purchase of a computer model-driven fund.
The acquisition enables Zurich-based GAM to introduce a computer-driven trading system focused on long-only and alternative strategies, the Zurich-based asset manager said in a statement on Wednesday. The shares rose the most in almost four months.
Cantab Capital, a firm based in Cambridge, U.K., with $4 billion in assets under management, uses mathematical models to decide when and which securities to buy and sell. GAM expects the purchase to contribute to earnings in the first full year of ownership after the deal closes in the second half of 2016.
"We have been evaluating how best to enter the systematic space for the past 18 months," GAM Chief Executive Officer Alexander Friedman said. "The market turmoil following the U.K. referendum last week has only reinforced our determination to pursue, and deliver on, our strategy of diversification and long-term growth."
GAM jumped as much as 9.9% in Zurich trading and was up 7.9% at 9.12 Swiss francs as of 12:15 p.m. The Bloomberg Banks and Financial Services Index advanced 2.6%.
MARKET VOLATILITY
GAM has declined about 43% this year as clients withdrew money amid market volatility, and the company warned of lower first-half profits from performance fees barely above zero. Active asset managers are also under pressure from the cost of regulation and increased flows of investor money into instruments such as exchange-traded funds that passively track markets.
Friedman and Ewan Kirk, Cantab's co-founder and chief investment officer, say they have been in discussions for about a year and the deal isn't a reaction to recent events. The deal comes days after the U.K. referendum roiled markets, triggering a selloff in European equities and the pound.
"The last couple of weeks, as well as January and February, underscore just how important it is for a global firm like ours to have a capability in this space," Friedman said by telephone. Together, the two firms will "move quickly to develop a series of other strategies and solutions," he said.
Computer-driven hedge funds were among the best performers following Britain's surprise decision to leave the EU. Lynx Asset Management posted a 5.1% gain last Friday in one of its funds, according to its website. Capital Fund Management gained 4.2% that day in its Discus fund, while Systematica Investments, the $10.2 billion fund run by Leda Braga, gained 1.35% in its main BlueTrend fund, people with knowledge of the matter said.
CORNERSTONE
Cantab Capital will form the cornerstone of GAM Systematic, a new investment platform dedicated to products covering alternative investments and long-only traditional asset classes such as equities, debt and multi-asset strategies, according to the statement.
Cantab Capital "did very well" in the first two months of the year, "when everybody thought the world was ending," Kirk said by phone, without disclosing figures. The firm gathered $81.9 million in fees in 2015, of which $32.9 million was based on performance, according to GAM's statement.
Prior to establishing Cantab Capital in 2006, Kirk was a partner at Goldman Sachs Group Inc., where he developed the bank's quantitative technology and trading platform across commodities, currencies, interest rates, credit and equity. He maintains close links with the University of Cambridge and has hired staff with degrees in mathematics, physics, statistics and computer science to help manage assets for clients such as pension funds, sovereign wealth funds, endowments and foundations.
Cantab Capital, owned by six partners who will share the proceeds of the transaction, will benefit from reaching more investors through GAM's 200 distribution and marketing staff, Kirk said. The partners retain a 40% interest in future performance fees under the deal.
GAM is funding the transaction from cash resources of 458 million francs ($467 million) and has temporarily suspended its share buyback program that runs until April 28, 2017, to maintain appropriate levels of capital, the company said.
