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Alpha Growth headed for a 'transformative' 12 months?

Published: 12:32 17 Jun 2021 BST

Alpha Growth PLC -

There looks to be a quiet transformation taking place at the alternative asset manager Alpha Growth PLC (LON:ALGW) – and one the market has possibly yet to fully understand.

While that may be the source of some short-term annoyance for the management, led by Gobind Sahney, it could be looked on as an opportunity for those with an eye for hidden value.

In late March, Alpha completed the acquisition of Bermuda-based holding company Northstar Group and its wholly-owned Providence Life Assurance Company, backed by an oversubscribed share placing of £3.75mln.

Deal expected to have significant impact 

In one fell swoop, assets under management jumped to US$300mln from US$10mln at the start of last year. Analysts point out that the consequent significant uptick in revenues should render the business EBITDA positive.

Crucially, the transaction moves Alpha into insurance, which is complementary to the existing business in the “longevity asset space” and was part of the firm’s long-term strategy.

Chairman Sahney, in an interview with Proactive when the deal was first announced, called the transaction “transformative”.

“Our objective has always been to increase our assets under management that generate long-term revenue, which we call sticky revenue,” he explained.

“That said, we have mentioned in the past we were looking at establishing an insurance company essentially to supplement the activity we have in the longevity asset space.

“So, when this opportunity came up last year, we took a serious look at it and determined an existing insurance company with assets under management and generating revenue was a better route than starting de novo.”

He explained the plan was to “aggressively grow” the insurance arm via a build or buy strategy.

Life settlements explained 

At the same time, the longevity business, which specialises in life settlement assets via its BlackOak Alpha Growth Fund, is growing at a decent clip.

For the uninitiated, life settlements effectively create a secondary market for life insurance policies.

The example below, provided by a person with knowledge of the sector, describes practically and at an individual level how the process works:

“Someone might have a life insurance policy that is set to pay out US$1mln on their death; however they would like the cash today to spend with their family.

“They can request an early payment of say US$700,000.

“Alpha will then take over the monthly payments and upon the clients, passing will receive the US$1mln.

“All beneficiaries have to be aware and there’s consent; so there are no surprises down the line.

Years in the making

A secondary market in life settlement assets has been years in the making and has now gathered investment scale.

As a result, institutional investors have waded in by investing billions of dollars.

Alpha’s stated aim is to provide specialist services in this particular sector for institutions, family offices, and high net worth investors looking for stable returns.

Certainly, its BlackOak Alpha Growth Fund seems to be doing just that. In 2020 it returned a net 10.63% for the calendar year, putting it in the top five of the Barclays yearly hedge fund performance rankings.

This success will inevitably breed further success, but it will also help a new senior hire who has been brought to lead the growth in this arena.

Key hire flies under the radar

Head of business development Michael Malloy has over 20 years experience of in building relationships and growing assets under management - and raised over US$300mln for a fund in his previous role.

Observers believe the addition of Malloy and the recent acquisition bode well for the business but add that Sahney and his team probably aren’t getting the credit they deserve.

One source who has followed the company since its start-up told Proactive: “Gobind has worked tirelessly for the last two years to build the foundation of a solid business and increase the assets from US$10m a year ago to over US$300mln today….it should lead to a very exciting 12 months for the company.”

For more information on Alpha and the BlackOak Alpha Growth Fund, click here

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