Aberdeen buys FLAG Capital for US real assets experience

The UK's Aberdeen Asset Management has agreed to buy FLAG Capital Management in a deal that will double the assets managed by its private equity unit.

Aberdeen Asset Management, the global asset management group, has agreed to acquire US private equity and real assets manager FLAG Capital Management, to boost its global alternatives platform.

FLAG focuses on venture capital, small- to mid-cap private equity and real assets in the US, and private equity in the Asia-Pacific region. The firm invests in natural resources including timber, agriculture, metal/mining and real estate funds.

FLAG’s natural resources teams will give Aberdeen experience in opportunistic investing, and specifically in agriculture, in value-added opportunities. This includes boosting the productive capacity of the land, upgrading infrastructure or irrigation and restructuring tenant leases to include a share of crop yield successes with the farmer.

The asset manager invests into funds on behalf of clients and is currently deploying its third real assets fund of funds which closed on $200 million. It does not allocate a specific portion of any fund to agriculture or other real assets.

“Institutional investors are increasingly looking towards alternative asset classes, including private market allocations, to diversify their portfolios and enhance returns,” Martin Gilbert, chief executive of Aberdeen, said in a statement. “This transaction is in line with Aberdeen’s strategy of undertaking clear value-added acquisitions that will assist with accelerating business growth in this area. FLAG meets this objective in two ways. Initially, it strengthens further our private market capability by bringing additional Asian expertise and new US resource.”

The combination of the two will result in a global private equity investor with about $21.3 billion in assets under management, of which $6.3 billion comes from FLAG.

Aberdeen said in a statement that it believes FLAG’s expertise in launching private equity and real asset-related products will permit Aberdeen to further grow organically in the sector. Also, FLAG’s long-established presence across the institutional and high net worth investor base in the US increases Aberdeen’s exposure to the region and enhances its footprint among family offices, endowments and public and corporate pension plans, according to a press release.