Independent investment consultancy bfinance completes management buyout

The bfinance team has completed a management buyout supported by Beach Point Capital Management

London, Tuesday 14th February 2023: The management team of global investment consultancy bfinance has undertaken a buyout of the firm, with the purchase of a 51% stake formerly held by Baird Capital. The transaction has been supported by Beach Point Capital Management.

bfinance has enjoyed significant growth through recent challenging conditions. Both the pandemic and the subsequent macroeconomic climate have brought new opportunities for the tech-enabled consultancy to assist pension funds, charitable foundations, university endowments, insurers, wealth managers and other clients. The firm’s revenues have increased by c.70% since 2018, with particularly strong growth in the Private Markets and Portfolio Solutions divisions.

In addition to growth, the team has also delivered consistently outstanding scores for client satisfaction. The most recent independent assessment of client satisfaction, conducted by third party firm T4 Associates gave the firm an industry-leading Net Promoter Score of 70, reflecting the firm’s ongoing commitment to working as an extension of its clients’ teams.

Diversification and expansion

A broader modular service offering, an increasingly diverse global client base and technological advancement have underpinned the firm’s recent growth and resilience.

Founded in 1999, bfinance first rose to prominence among pension funds and other institutional investors for its innovative approach to Manager Selection. Today the team also provides a broad range of modular services across Portfolio Design, Risk, Monitoring and more. Recent years have brought particular developments in ESG/Impact Advisory, Fee Reviews and Operational Risk, with several new services launched by the rapidly growing Portfolio Solutions division as well as enhancements to pre-existing services.

Within manager selection itself, which remains a core service offering, the firm now enjoys stronger asset class diversification. While traditional asset classes remain a core capability, approximately 44% of client engagements over the past year have focused on private markets, versus 29% in 2018. Investors have been tackling an increasingly broad landscape of illiquid and liquid alternative investment strategies; bfinance has responded to evolving demand with additional resourcing, with the firm’s research team more than doubling in size over the past five years.

The diversification of the firm’s client base–both by geography and by investor type–has also been a major contributor to growth. Although bfinance was founded in Paris and is headquartered in London, 50% of the firm’s revenues now come from engagements for investors outside Europe, compared with 39% in 2018. That shift has been led by growing client bases in North America, the Middle East and Africa, Asia and Australia. In particular, revenues relating to North American clients have increased by more than 300% since 2018 while the number of client engagements in this region has risen by 150%. Overall, bfinance now has clients in 43 countries and company offices in nine countries.

Pension funds have long comprised the largest client group for bfinance, and still represent 41% of the firm’s revenues, but the strongest increase in activity has come from other ‘asset owner’ segments such as insurers, foundations/endowments and wealth managers seeking to build better strategies for their underlying HNW clients. Insurers, for example, now represent 21% of the firm’s activity, up from 14% in 2018. Foundations and Endowments (including Charities) now represent 14% of activity, up from 7% in 2018.

Dedicated consulting focus

The transaction preserves the firm’s position as a pure-play global investment consultant – an ‘increasingly rare breed’, according to Pensions & Investments, following a fifteen-year period when many firms have consolidated, merged and launched asset management services. These industry trends have provoked concerns around competitiveness and conflicts of interest, not just from investors but also from regulators such as the UK Competition and Markets Authority (CMA), whose 2018 enquiry urged pension fund trustees to promote competition.

bfinance’s ability to remain a standalone investment consultant is largely due to its differentiated model, technological capabilities and fee structures that are designed to minimise the cost burden on investors.

David Vafai, Chief Executive Officer at bfinance, said: “We are very excited to be buying back our business via an MBO supported by Beach Point. The continued growth, complexity and transformation of the global asset management market combined with bfinance’s unique competitive positioning offer a tremendous opportunity for us to create even more value for clients in this next phase of our growth. We thank our clients and team for their ongoing support as we continue with our mission of building the only truly independent, global, data and technology powered investment consulting firm.”

Shane Lanigan, Portfolio Manager at Beach Point Capital Management, said: “bfinance embodies the characteristics that we look for in our investments. The company has an established brand with excellent opportunities for growth and a strong management team. The business has proven to be extremely resilient through different economic cycles and we look forward to partnering with the management team to take the business into the next stage of its growth.”

Andrew Ferguson, Partner at Baird Capital, said: “It was a pleasure to partner with bfinance over the last six years, and we wish them well as they enter this next stage of their journey. The team at Baird Capital is deeply proud of the growth we’ve helped them achieve over our investment period, expanding the services provided and significantly increasing overseas revenues across Europe, the Middle East, Australasia and North America. We look forward to cheering them on as they continue to grow the business.”