Insurance and asset management group Assicurazioni Generali and Peter Kraus, the former Chairman and CEO of AllianceBernstein (AB) and Global Co-Head of Goldman Sachs’ Investment Management Division, have launched Aperture Investors, a new asset management company with a disruptive revenue model led by Kraus (pictured).
Generali will contribute up to USD4 billion of strategic investment capital for individual investment strategies, subject to the approval of Assicurazioni Generali’s Board of Directors and Aperture Investors.
In Aperture Investors’ revenue model, the firm charges ETF-like fees, which can only go higher when managers beat their benchmarks. Similarly, managers are paid modest base compensation and can only earn more when they generate outperformance, a major departure from the traditional fixed-fee structure in which managers are compensated based on the volume of assets managed. In addition, a deferral mechanism provides for unearned compensation to be returned to Aperture Investors’ clients ensuring that the profitability of the firm is dependent on whether or not its clients receive returns in excess of benchmarks over the long run.
Tim Ryan, CEO of Generali Asset Management, says: “Aperture Investors is another important milestone in Generali’s multi-boutique strategy launched last year. We believe that innovation is not only a key lever for our long-term success but also an opportunity for Generali to guide the process of change as a leader in the insurance and financial industry. Aperture Investors offers us the ability to develop a new model that addresses manager incentives while also leveraging invaluable know-how in our sector.”
Carlo Trabattoni, Head of Generali Investments Partners, says: “Peter Kraus has a twenty- year history of successfully leading global financial organizations and the ability to inspire and attract talent eager to transform the business of asset management. The total AUM in the world amounts to well over USD84 trillion, many active managers are underperforming and passive indexing is growing. With Aperture, we want to combine the interest for passive with the need for active.”
“Asset management is an industry long-overdue for disruption. There are currently too many active managers managing too much money. Fixed fees and a lack of real capacity constraints have long incentivised managers to grow assets under management rather than pursue outperformance,” says Kraus, Chairman and CEO, Aperture Investors. “This structure has led to years of poor performance that has eroded client trust in active management. We intend to change this by aligning manager and client incentives around outperformance. We do this by charging fees that are similar to passive ETFs when performance is at or below a stated benchmark – and we only charge more when we generate outperformance.”
“It’s our belief that investors would rather pay for performance than pay regardless of whether or not they get any, and the only way to do that is to disrupt the long-held model of fixed fees based on AUM in asset management.”
