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Thursday, May 2, 2019

Resolute Invests In a Tax-Loss Harvester

Reported by Neil Anderson, Managing Editor

Gene Needles and his team are doing another deal, though not an outright purchase.

Needles, chairman and CEO of Resolute Investment Managers, confirms that the Irving, Texas-based multi-boutique asset manager has agreed to buy a minority stake in a Portsmouth, New Hampshire-based ETF strategist: Green Harvest Asset Management. Two-year-old Green Harvest had $40.5 million in AUM as of March 31 and $116 million in AUA, and the firm has a seven-person team. Resolute and its boutiques had $70 billion as of March 31.

Pricing and terms of the deal, including the size of Resolute's stake, were not disclosed, nor was the expected timeframe for closing the deal. Raymond James' Silver Lane advised Resolute on the deal, and Skadden Arps Slate Meagher & Flom provided legal advice.

Green Harvests' employees will own the bulk of the shares not owned by Resolute, with friends and family owning a bit. Yet the deal offers Resolute a "path to control," Needles says.

"Our intent is to ultimately own a majority stake ... down the road," Needles tells 401kWire.

Meanwhile, one Green Harvest executive is on the rise. Robert Holderith, founder and CEO of Green Harvest, confirms that Brian Jacobs, chief operating officer and head of distribution, has been promoted to president.

Green Harvest specializes in tax-loss harvesting strategies, but instead of using individual securities, they use ETFs. That, Needles says, means they can "create tax alpha more rapidly," expand tax-loss harvesting to asset classes beyond domestic equities, and drive down the operational costs for FAs using the strategies for their clients.

"This is a unique approach to tax-loss harvesting in the marketplace, and because of that our expectations for it are really high," Needles says. "It's a great complement to the rest of our business and our affiliates."

As with most of Resolute's deals, a key factor here will be distribution support. To begin with, Resolute will have a couple specialists supporting distribution for Green Harvest and just one other boutique (also focused on tax-sensitive investors), plus generalist external wholesalers and internal wholesalers.

"We generally don't even look at something unless we believe we can help them grow," Needles says.

Holderith lauds the Resolute team for understanding and respecting Green Harvest as a business.

"We see great synergy between our two firms and look forward to tapping into Resolute's resources and capable sales team while expanding their suite of investment strategies," Holderith states.

Looking ahead, Needles is still in the market for more deals, though he notes that because they "have so much inbound activity," they're mostly evaluating such inquiries, as opposed to proactively searching for deals.

"We're still looking for potential partners on the subadvisory side, on the fund adoption side, and on the acquisition side," Needles says.

Green Harvest will be Resolute's eighth investment boutique (not counting its various outside subadvisors). Resolute already majority owns four boutiques: American Beacon, Alpha Quant, Continuous Capital, and Shapiro. They also bought minority stakes in ARK and RSW, and they're in the process of buying SSI. 

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