The deal, disclosed on Tuesday, comes as Goldman is working to bulk
up its asset management unit, partly by strengthening its
quantitative product offerings. It is also part of a broader trend
of money managers offering so-called "smart beta" strategies that
deliver the high returns of some actively managed fund but with the
lower cost of investing in an index fund or exchange-traded fund.
Westpeak creates and distributes its investment strategies through
alliances with companies including FTSE Group, Russell Investment
Group and Natixis. Like other smart beta firms it picks stocks for
its index funds based on factors apart like volatility, liquidity or
relative value, rather than market capitalization.
In an interview, Armen Avanessians, the head of Goldman Sachs Asset
Management's quantitative business, and Gary Chropuvka, its head of
customized and tax efficient beta businesses, said the deal was
attractive because Westpeak's products complemented GSAM's existing
offerings and because its employees were a good cultural fit within
the Wall Street bank.
"We were enamored with the approach and we're quite excited about
the people," said Avanessians.
Goldman declined to provide terms of the acquisition, which it
expects to close in June. Westpeak and its employees will remain in
Boulder, Colorado, where the company is based.
Goldman is still working to repair damage from quantitative-fund
losses during the financial crisis. One of its biggest quant funds,
Global Alpha, shuttered in 2011 after losing more than $10 billion
of investor money since 2007.
In a report last October, Credit Suisse analysts said GSAM was still
suffering from a lack of client demand for quant products. Chropuvka
said the business has seen "pretty strong flows" recently, and now
has $50 billion in assets under management, $30 billion of which
pertains to the smart-beta strategies that are Westpeak's specialty.
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Data from the consulting firm Towers Watson show that smart-beta
strategies have beaten market-cap strategies by 0.9 to 2.1
percentage points, on average, since 1964. Institutional investors
allocated three times as many assets to smart beta strategies in
2013 as they did the previous year, Towers Watson said. Investment
management firms ranging from Blackrock Inc <BLK.N> to WisdomTree
have been developing smart-beta funds to capture investor interest.
Goldman's Advanced Beta Strategies platform offers three categories
of products: those that aim for returns similar to hedge funds,
those that provide customized returns depending on a client's
investment objectives, and those that are focused on tax-efficiency.
Avanessians said Westpeak's products would appeal to institutional
clients that do not bet against stocks, and want to have liquidity
and transparency into index components.
(Reporting by Lauren Tara LaCapra; editing by Bernard Orr)
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