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Philadelphia Business Journal: FS Investments making first acquisition in 12-year history

December 17, 2019

This article was originally published in Philadelphia Business Journal

By Jeff Blumenthal – Reporter, Philadelphia Business Journal

FS Investments is making its first acquisition in the fast-growing firm’s 12-year history while at the same time serving as its entry into the conventional investment management world.

Financial terms for Chiron Investment Management were not disclosed. Chiron’s nearly $2 billion in assets under management represents about 8% of the $24 billion at FS.

Chiron has dual headquarters in Kansas City and New York. Philadelphia-based alternative investment manager FS will open an office in Kansas City and the two firms will ultimately merge their respective New York locations into one.

FS was formed in 2007 by CEO Michael Forman. The company is headquartered in Philadelphia’s Navy Yard, manages 11 funds and has over 300 employees in four offices across the country.

Founded in 2015 by CEO Enrico Gaglioti and Chief Investment Officer Ryan Caldwell, Chiron’s investment strategy is a mix of high tech and traditional analysis the company calls the quantamental investment process.

Caldwell had led portfolio management at Waddell & Reed for a suite of funds that grew to $40 billion. Chiron surpassed $1 billion in assets under management 18 months after launching its initial fund, with Caldwell using much of the same investment strategy he did at Waddell — even adding nine former colleagues from his former employer.

Having launched three funds just four years ago, Chiron currently manages approximately $1.8 billion in assets raised across its global distribution platform. Following the close of the transaction, FS will add Chiron’s three funds to its current offerings.

Caldwell will continue to manage the legacy Chiron portfolio while working with the team at FS to develop strategies to leverage the power of both firms’ expertise.

The two firms were connected through a pre-existing relationship between FS CIO Mike Kelly and Gaglioti, from the latter’s time as head of equity sales at Goldman Sachs.

Following the close of the transaction, expected in first quarter 2020, Gaglioti will join FS in a senior leadership position.

While Chiron represents its first formal acquisition, FS did complete a major transaction a year ago when it merged its publicly traded fund, FS Investment Corp., with New York-based Corporate Capital Trust.

The fund was renamed FS KKR Capital Corp. and is externally managed by FS/KKR Advisor – the partnership created in April 2018 when FS closed a previously announced deal with global investment firm KKR. With that agreement, KKR replaced GSO Capital Partners as investment adviser to six of FS’s business development companies. GSO is the credit-focused subsidiary of the Blackstone Group.

A business development company, commonly called a BDC, is an organization that makes debt or equity investments in small and midsize companies in the initial stages of their development. In recent years, BDCs have become a key funding source for businesses and key alternative investment product for investors.

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