Barings eyes private wealth with Aussie acquisition

US investment manager Barings has expanded its structured finance presence in Asia-Pacific with the acquisition of Gryphon Capital Partners.

GCP is the parent company of Gryphon Capital Investments, an asset manager targeting secured credit in fixed income markets across Australia and Europe. GCI has A$2.6 billion ($1.73 billion; €1.61 billion) of assets under management, comprising the A$484 million Gryphon Capital Income Trust and A$2.1 billion of separate accounts for institutional investors, co-founder Steven Fleming told Private Debt Investor.

GCP was created in 2014 by former Threadneedle executives Steven Fleming and Ashley Burtenshaw, both of whom will remain as portfolio managers post-acquisition. Financial terms were not disclosed.

“We started chatting with Steven, Ashley and their team back in the summer of last year, exploring ways in which we could partner,” Barings’ global head of private structured finance William Awad told PDI.

“Barings has a growing presence in Asia-Pacific and so we were very interested in growing our investment, both manufacturing and distribution, in that region. What we find super attractive about this opportunity is the culture – the Gryphon team really has the same ethos as we do about bottom-up analysis; data being all important; really understanding at the low level how your assets are performing; and an eagerness to expand.”

The transaction is expected to close on 31 March, per a 15 March filing with the Australian Securities Exchange.

Launched in 2018, the GCI trust comprises 60 percent residential mortgage-backed securities, 18 percent asset-backed securities, 17 percent non-conforming RMBS and 3 percent cash, per its latest investment update. It distributed 4.79 percent to investors last year, assuming monthly compounding.

“Being able to expand and offer global product to our clients, both institutional and in the wealth space, is very exciting,” Fleming said. “I think it’ll be a unique offering that Barings will be able to deliver for our clients, coupled with being able to expand our existing platform with a focus on our listed vehicle, GCI. But also Barings have clearly got a very good institutional platform within Australia and being able to utilise that is also appealing for Gryphon.”

Gryphon marks Barings’ second acquisition in Asia-Pacific in less than a year. In August 2022, the firm acquired Australia’s Altis Property Group in a deal that brought with it an established fund management platform comprising 44 real estate equity professionals focusing on value-add strategies across Australia and New Zealand, affiliate title PERE reported at the time. It has since expanded its real estate debt business in the region.

For Barings, the Gryphon acquisition expands access to a new pool of permanent capital, Awad noted. “In terms of the investable opportunities, we really see that there’s an excellent opportunity to grow within the Aussie market,” he added.

“Even though structured finance is big, it’s still an underrepresented market in a lot of investors’ baskets. That’s a fundamentally attractive attribute and a challenge… in growing the private wealth channel within Australia. But if you look more globally, there is a growing appetite to find diversifying investments… particularly given the type of environment that we’re in.”

Gryphon’s team will remain in Brisbane and collaborate with Barings’ existing 60-strong team in Sydney covering different functions. “We think it’s absolutely fine to establish another office in Brisbane to ensure we have a well-functioning team and that we’re working strongly together,” Awad added.

Banking on stability

The acquisition comes at a critical time for debt markets globally, with the US banking sector rocked by uncertainty in the wake of Silicon Valley Bank’s collapse.

“Our core institutional strategy is a risk adverse, AAA-rated High Grade ABS strategy, which historically has outperformed in unfavourable economic conditions,” Fleming said.

“It was difficult before the recent events in the US, and it will likely get more difficult with enhanced volatility. This plays to our strengths, and we remain convinced that this asset class will continue to perform which will create opportunities for both Barings’ institutional distribution but also we are looking to introduce more and diverse investment solutions to the wealth market to meet the evolving needs of investors.”

Of course, volatility can be a mixed blessing when pursuing new sources of investor capital.

“Volatility is spreading across the marketplace; both of our respective cultures and the structure of our business model can really benefit from it in terms of the value-add proposition that we have and the way that we can be very tactical and exploit the platform’s optionality to capitalise on dislocations,” Awad said.

“The educated investors will be highly interested in this. When speaking of inflows and outflows in a broader sense, I would argue that retail investors are likely to be split by current events, and there will be a pervasive net outflow as people become risk-averse. With our combined businesses, there is an aspect of being defensive in terms of having strategies offering to both institutional and wealth clients.”