HighVista Strategies is buying the U.S. private markets business of abrdn — a deal that will almost double the size of the Boston-based alternative investment manager.
HighVista, which currently has $4.8 billion in assets under management, expects to gain $4 billion in private equity and venture capital assets in the acquisition, which includes a 30-person team.
The transaction will close later this year.
André Perold, co-founder and CIO of HighVista Strategies, said he and his fellow partners first met the abrdn team, which specializes in the middle market, more than five years ago. He said the abrdn investment team and business fit with HighVista’s sole focus on inefficient markets.
“The question is, ‘How do you find alpha?’ Our way is to find areas where there are structural inefficiencies, where a company needs help or the market doesn’t understand it. Ideally, there’s something systematic about it, where you can see it and you can organize around it, and put capital to work,” said Perold, who had taken a sabbatical from Harvard Business School when he helped found HighVista in 2004.
The abrdn deal illustrates a number of industry trends, according to consultants. Alternatives have continued to gain popularity among institutions — even as many limited partners have been left with too much money locked up in private equity after last year’s market downturn — and there’s also a growing appetite from wealthy individuals, the consultants say. The lift-out is also an example of the type of deal that is still working in asset management. While the pace of mega deals has slowed, large and small firms are still looking for higher-fee alternatives and adding niche capabilities.
HighVista was founded around the idea of creating a single fund that invested like the big endowments, which were outperforming other institutions at the time by adding alternatives and imposing few limits on the kinds of investments they would consider. According to Perold, HighVista created the fund for institutional investors who didn’t have the network, skills, or governance to mimic the endowment model. About half of HighVista’s assets are still in these multi-strategy funds, but the asset manager has since expanded into specialized alternative investments, including opportunistic private credit and equity, and biotechnology stocks.
“We think the lower middle market part of the private markets is the juiciest part — the most opportunities are there,” said Raphael Schorr, deputy CIO and partner at HighVista. HighVista has long focused on private and public small companies, which the firm believes have far better return prospects than larger ones. As Schorr put it, “It’s the best stocked pond, with by far the most number of fish, and not to mention, some of the fish will be particularly delicious.”
The abrdn team, which dates back to 1994, focuses on this niche. Schorr said that while there may be more opportunities in the lower middle market, it takes expertise to find them — whereas investors can easily put money to work in the larger end of the market.
“What’s hard about this very well stocked pond is that it’s a bit overwhelming,” Schorr said. “Investors will say, ‘I get it, but I can write a single check to a large fund and access growth equity or buyouts.‘ It’s hard to identify and access smaller opportunities. And even if you have identified them, it’s hard to conduct proper diligence. You need the pattern recognition, the network, the access — and these teams bring that.”
Kirsten Morin and Peter Mooradian, co-heads of abrdn’s global venture capital investments, will continue to manage the VC strategy. Peter Lawrence, co-head of global venture capital, will become a senior advisor. The senior U.S. private equity team, which includes John Dickie, Scott Reed, and Whit Matthews, among others, will oversee U.S. private equity. The abrdn investment team was unavailable to comment.
