F-Squared files for Chapter 11

September 2015 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

Following the filing of its voluntary petition under Chapter 11 of the US Bankruptcy Code, F-Squared Investments has signed an agreement to relinquish its operating assets to Broadmeadow Capital, a subsidiary of Cedar Capital.

Under the terms of the deal, Broadmeadow will acquire the intellectual property, investment strategies and substantially all of the investment contracts of F-Squared. The proposed agreement will allow F-Squared to ensure a smooth and quick transition of the business supported by a robust operating infrastructure.

To help facilitate the sale, F-Squared is seeking court authorisation to pursue the process on an expedited basis under Section 363 of the US Bankruptcy Code. The agreement with Broadmeadow contemplates a court supervised auction process designed to achieve the highest or otherwise best offer for the company’s assets.

An asset manager operating in the adviser, institutional, retail and retirement markets that provides investment indexes and strategies based on its AlphaSector and Applied Dynamic Replication capabilities, F-Squared seeks to provide an investment approach that protects clients in down markets and helps them participate in up markets. The firm also focuses on delivering innovative investment solutions to help meet investors’ expectations and financial goals.

“We are pleased to have attracted, in Cedar Capital and Broadmeadow Capital, firms that have a deep understanding and established presence in asset management and investment advisory services,” said F-Squared chief executive officer Laura Dagan. “This transaction will allow clients to continue receiving industry-leading service and provide them with access to complementary, broad investment strategies.

“Broadmeadow Capital shares Alpha Sector strategies’ research-driven quantitative investment approach. Broadmeadow Capital will preserve the continuity of certain F-Squared employees, including investment, research and client relationship professionals, who will join Broadmeadow Capital in connection with the transaction.”

F-Squared will continue operating as usual throughout the sale process. The company has filed customary motions with the court to continue providing employees their usual pay and benefits on a timely basis and will continue to pay suppliers in full under normal terms for goods and services provided after 8 July 2015.

The agreement between F-Squared and Broadmeadow sets the floor, or minimum acceptable bid, and is subject to Bankruptcy Court approval and certain other conditions.

“This acquisition presents a timely opportunity to expand Broadmeadow’s product portfolio,” confirms Broadmeadow Capital president David Cabot. “We see merit in the AlphaSector investment strategies and methodologies, despite how their performance track record prior to 2009 was portrayed to investors. We look forward to providing continuity and stability to investors in these strategies.”

Broadmeadow Capital is a quantitative asset manager based in Boston which seeks to help

investors manage exposures to global equity, fixed income and commodity markets while incorporating hedging techniques based on changes in volatility and investor behaviour.

The parent company of Broadmeadow, Cedar Capital, delivers innovative investment solutions through its industry-leading sales distribution and service capabilities. The firm provides a single point of access to multiple, diversified and unique investment strategies. Cedar Capital’s goal is to identify superior asset managers in their respective categories who have an ability to address the growing complexities of today’s financial markets.

“This transaction reinforces Cedar Capital’s position as a single point of access to innovative investment strategies well suited to evolving market dynamics,” said Cedar Capital CEO Paul Ingersoll. “Once completed, the acquisition will provide for uninterrupted service under the leadership of the Broadmeadow Capital team, supported by Cedar Capital’s robust operating infrastructure.”

The F-Squared and Broadmeadow asset purchase agreement will see a final sale approval hearing take place shortly after the auction and the anticipated closing is subject to the approval of the Bankruptcy Court and the consent of F-Squared’s clients.

Fraser Tennant