Private financing firm eschews long-term stakes for short-term sales shares. New York-based Asset Management Finance (AMF) has made an investment in Dallas-based Smith Group Asset Management. The deal gives AMF a minority share of Smith Group's top-line revenue for a predefined period instead of a direct equity interest in the firm.

Beyond that -- and that's how AMF structures all its deals -- details of the transaction between AMF and Smith Group weren't made public.

CalPERS

The deal with AMF lets Smith Group do two things, according to its founder and CEO Stephen Smith: achieve 100% employee-ownership and provide equity to a broader group of firm employees.

Before AMF came along Smith Group had two minority investors that have since been been bought out. One can't be named, the other ex-investors is the California Public Employees' Retirement System.

"Maintaining independence and providing incentives through equity participation are strategic advantages for our firm and our clients," says Smith. "No other capital solution we explored could provide that."

Smith Group is AMF's eleventh investment since its founding in and its third in three months.

Norton Reamer, AMF's president and CEO, says the private-financing firm's success is linked to a growing sense among boutique firms "that independence is a strategic asset that can attract clients and drive performance."

AMF has investments in firms that, all together, manage around $45 billion. Its financial backers include Montreal-based National Bank Financial and Tokyo-based Tokio Marine & Nichido.

The periods over which firms have to share revenue with AMF vary from deal to deal. On average though, firms split a portion of their non-operating funds with AMF for 10 or 12 years.

Smith Group manages more than $5 billion, mainly for high-net-worth clients. It was founded in 1995. -FWR

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