Ohio based GLASfunds, backed by CI Financial, open to seeding emerging strategies
Emma Cary, 23 MAY 2022
Alternative investment platform GLASfunds is searching for US-based credit hedge funds and private debt managers.
The $1.36bn Ohio-based platform also said it was interested in sponsor-backed middle market direct lending, non-sponsor backed direct lending, and asset-based lending. It does not want strategies that reinvest income.
Managing director of investments Brett Hillard said it is also interested in “more focused” credit opportunities that get into various smaller aspects of the private credit market – an emerging theme among institutional allocators.
“Credit strategies that finance to very specific markets/smaller borrowers can be less competitive,” he said. “They can thus provide an attractive combination of pricing and risk controls compared to more competitive areas like sponsor backed middle market direct lending.”
Hillard said the search will focus on the US due to currency risk that can appear otherwise.
He, however, added GLAS would consider non-domestic US private credit if something “really unique” comes along.
GLASfunds’ assets break down into $1bn AUM and $360m in assets under contract (AuC). AuC refers to contractual commitments made by clients to a specific drawdown fund that have yet to be called.
Ticket size, which is a a function of demand by advisors, currently range from $3m to $50m, although this is not fixed.
Founded in 2009 by Michael Maroon, GLASfunds acts as an outsourced investment aggregator, seeking to offer institutional-quality due diligence and asset management oversight to intermediaries.
It serves RIAs and private banks across the US that manage between $500m to $60bn AuM. The company has recently signed deals with unnamed wealth managers in Tel Aviv and Canada. GLAS mainly helps these firms access alts strategies for their UHNW clients. Wealth firms can invest in single strategies available on the platform, or mix underlying strategies to create a diversified portfolio of alternatives.
Wealth managers who use GLASfunds include Huntington Private Bank, Clearstead Advisors, and another large Ohio-headquartered private bank.
CI Financial bought a minority stake in GLASfunds in November 2021, with an option to take majority control within the next four years.
GLASfunds do not have a minimum AuM for managers and will work with emerging managers, operating new private equity, credit or hedge funds.
“We have a wider threshold for smaller funds, although we don’t gravitate towards them,” Hillard said.
Maroon added that GLAS is also willing to seed the right opportunities.
“We are not in the seeding business but, you know, we don’t have an aversion to it,” he added. “To find something truly industry leading, you’re probably going to have to be early. Because if it’s truly great, it’ll become capacity constrained – so if you wait three to five years for it to build a track record, you’ll miss out
Although the platform works with smaller funds a bigger focus is established names.
Even when considering emerging managers, their track record is still important to the platform, so these opportunities are likely to be spinouts from larger firms.
Alongside a good track record, funds needed to show themselves as “institutional grade managers,” meaning they need to have strong service providers and back-office operations, as well as minimal business risk.
“We need robust business controls and the sort of institutional plumbing now available to smaller firms,” Maroon said.
ESG is not a criterion used by the platform in manager selection, with restrictions only occurring in certain “questionable” industries.
Red flags for GLASfunds include dishonesty and a lack of transparency.
“We want ethical, reputable managers,” Hillard said. “I don’t care if they’re arrogant, but any whiff of bad behavior, they’re out.”
When a manager runs into difficulties, GLAS expects a full and frank assessment, instead of deflection.
“If they try gloss over it, I’m just going to move on,” Hillard said. “We’re always inundated with new ideas, so why should I spend my time on an idea with a bunch of hair on it?”
The investment team strongly believes attention to detail on transparency signals operational robustness at the GP, which it argues typically goes hand in hand with successful investment practices.
Hillard and Maroon explained that there were two separate processes for onboarding managers, depending on if they were referred by adviser firms or if they were GLAS sourced.
For GLASfunds sourced managers, the platform conducts a standard due diligence process, using quantitative and qualitative measures.
It uses third-party databases, including Pitchbook and Venn by Two Sigma, to assess managers.
After completing a 15-to-20 page investment due diligence report, it retains a large US consultant for its operational due diligence review. This involves an onsite visit.
After both forms of due diligence are completed, funds will be onboarded on to GLASfunds and be accessible to all its partner firms.
Hillard said the platform receives a lot of inbound inquiries from managers. While many chose to contact him via his Linkedin, he said the most effective way to contact the firm is via the contact form on GLASfunds’ website.