iCapital to acquire alternative feeder fund platform UBS for $7 billion

The latest chapter in the feast of love between a New York-based fintech and a Swiss banking giant involves an alternative platform worth $7 billion in client assets changing hands.

Officials from iCapital and UBS announced on Tuesday that the two entities have reached an agreement in which iCapital will acquire UBS Fund Advisor, UBS’s former U.S. alternative investment manager and feeder fund platform. The deal comes as wealthy investors increase the dollars they invest in alternative investments, including hedge funds, private equity funds, real estate, cryptocurrencies and other assets that are neither stocks or bonds.

The multi-billion dollar platform, known as “AlphaKeys Funds”, includes private equity funds, hedge funds and real estate feeder funds. The officials said that once the deal is completed, UBS advisers will continue to serve their high net worth and ultra high net worth clients who hold feeder funds as usual.

The transaction is expected to close in the second half of 2022. Terms of the agreement were not disclosed.

“iCapital has a long-standing global relationship with UBS through which we use our industry-leading technology to make it easier to manage their direct and feeder funds on one platform and give their advisors the tools they need to succeed,” Lawrence Calcano, the chairman and CEO of iCapital, said in a statement. “We are delighted to extend this relationship to include the management of UBS Fund Advisor and the feeder fund platform.”

Jerry Pascucci, global co-head of alternative investment solutions at UBS, said the deal underscores the importance of having partners like iCapital in their corner. The bank’s connection to iCapital dates back to 2017, when UBS became an investor in iCapital and entered into a strategic relationship with the firm to structure new feeder funds that UBS will distribute to its clients?

Around this time, UBS integrated iCapital’s proprietary technology into its private fund operations to streamline and automate its alternative investment offerings. The two parties have strengthened the partnership in 2021 to further digitize the UBS advisor experience, improving client insights and analysis of private markets investments across its international locations.

“iCapital is uniquely qualified to manage the ongoing operations of this platform and serve our clients’ existing investments, allowing us to help our financial advisors focus on what’s important,” Pascucci said. “Provide personalized advice and solutions to their clients.”

In March, iCapital, UBS and Envestnet said they join forces to launch an alternative trading platform, offering more than 35 private funds to Envestnet clients. Business leaders said the expansion of the alternative exchange comes as investors increasingly seek to diversify into alternative investments.

According to an iCapital and Boston Consulting Group study “The Future is Private – Unleashing the Art of Private Equity in Wealth Management,” high net worth individuals are expected to increase their private equity investments at a compound annual growth rate of nearly 19%, with global high net worth investors’ private equity commitments reaching $1.2 trillion by 2025.

In early August, iCapital announced that it had completed the acquisition of SIMON Markets, a fintech company that develops a digital platform designed to help advisors understand and manage structured investments, annuities and other risk-managed products. SIMON is a platform with more than $48 billion in emissions in 2021, according to company officials.

Under the agreement, SIMON CEO Jason Broder will join iCapital as Head of iCapital Solutions and become a member of the Operating Committee. In this role, he will oversee the integration of the combined platform, market development and sales of iCapital’s full suite of technology offerings.

“We have long admired iCapital and all it has accomplished in the field of alternative investing,” Broder said in a statement. “After a highly collaborative exploratory process over the past few months, it has become abundantly clear that together we can create an unparalleled experience for our clients and set the stage for iCapital’s continued expansion of investment opportunities and advisor support services.

“Together, we deliver what the wealth management industry has wanted for a very long time. Access to all alternative solutions under one centralized platform.”