Private equity fund buys Alpha anticipating regulation budget shift

Dunedin has acquired a significant stake in consultancy firm Alpha, as regulation shifts budgets for asset managers.

Private equity investor Dunedin has acquired a significant stake in asset management consultancy Alpha FMC from outgoing investor Baird Capital. 

Baird Capital’s original investment in October 2013 valued Alpha’s business at £28 million, but Dunedin’s investment now values the firm at £80 million. 

The business has more than trebled in size in the last 3 years with profits increasing over 70%, from £2.3 million to in excess of £8 million in 2016.

A spokesperson at Alpha explained the firm is seeing an ever-increasing demand for its services as the industry is expected to spend more on regulation this year.

Alpha’s statement said: “The industry is expected to spend more on regulation in 2016 than ever before, with over 30% of change budgets typically dedicated to the regulatory agenda.

“High profile regulations such as MIFID II, PRIIPS, UCITS V and Solvency II continue to be of concern to asset managers. In addition, the recently released FCA Asset Manager Market Study looks set to bring a sharp focus to the industry.”

Alpha anticipates increased client activity across technology. The firm explained: “Recent years have seen Asset Managers shift towards hybrid enterprise technology solutions, implementing core front-to-middle, middle-to-back or front-to-back platforms, and augmenting these with point solutions in areas such as risk, performance measurement and attribution.

“Executing on these change programmes also typically involves a significant degree of operating model change or process re-engineering.”

Alpha’s growth reflects the impact of regulation on the industry, as implementing changes such as MiFID II add to the growing costs for asset managers.

Its recent study on front office outsourcing has caused quite a stir in the market, as it found half of asset managers would consider outsourcing the front office. Cost-cutting and regulation are thought to be the reasons behind this shift.

Read The Trade’s investigation into the study here.