AlphaShares Sells Equity Stake

February 12, 2008

Index provider eyes expansion in future.

Private-equity firm Northern Lights Ventures has bought a share of an index provider with Burton Malkiel as its chief investment officer.

AlphaShares, which is based in the San Francisco Bay Area, said Tuesday it has sold an undisclosed stake in its start-up business to the Tacoma, Wash.-based Northern Lights.

The indexing company is headed by the founder and ex-chief executive officer of Active Investment Advisors, Kevin Carter. Its research director, Mark Adams, also came from the firm. AIA was bought by Ixis Asset Management in 2004.

Carter and Adams brought Malkiel, the noted author and Princeton University economics professor, with them when they formed AlphaShares.

The firm has two exchange-traded funds (ETFs) based on their benchmarks: The Claymore/AlphaShares China Real Estate ETF (NYSE: TAO) launched in December and the Claymore/AlphaShares China Small Cap ETF (AMEX: HAO) opened at the end of January.

The managing director of Northern Lights, Paul Greenwood, will join AlphaShares' board of directors. "We are thrilled with the opportunity to work with AlphaShares," Greenwood said in a statement. "Burton Malkiel is one of the most respected names in the investment world."

Combined with the experience of AlphaShares' investment team in Asian markets, he added, opportunities abound in China.  

?Also, AlphaShares board member Julian Rainero has stepped down and the company has converted to an LLC structure.

Malkiel termed the deal as key to providing AlphaShares with more resources to expand.

"We believe that China is set to dominate the world economic stage of the 21st century. In fact, it already is," he said. "Most investors, be they institutions or individuals, are greatly underexposed to China and should consider adding an allocation to this important economy."    

Northern Lights has been active in the past year on the private-equity side. It grabbed headlines early in 2007 by helping managers at TAMRO Capital Partners take control of the firm from global giant ABN Amro Asset Management. TAMRO managed $750 million at the time of the management buyout for institutional and individual investors.

In June 2007, Northern Lights bought into Phocus Financial Corp. Founded in 2005, it specializes in small-caps, REITs and income-equity investing for institutional as well as high net worth individuals.

Last month, Northern Lights took a minority stake in Elessar Investment Management. It was formed in 2005 by ex-National City Bank executives.

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