RiskMetrics Group says a group of private equity investors led by Spectrum Equity Investors has agreed to recapitalize the company. Under the terms of the recapitalization, Spectrum Equity Investors and General Atlantic Partners along with Technology Crossover Ventures will invest a total of $122 million.
Recognizing the extraordinary growth in the market for financial risk management products and services, this group of investors was drawn to RiskMetrics Group for its industry-leading methodology and its wide range of service offerings for both institutional and retail clientele. The transaction provides liquidity to selling shareholders while enabling the company to continue to invest and serve customers with leading-edge solutions.
“The last several years have taught investors that risk is the most important component in every allocation decision,” says RiskMetrics Group CEO Ethan Berman. “As a company, we’ve devoted ourselves to making those decisions better informed. It is gratifying to know that we have the support to continue to forge new ground in the service of that goal.”
“RiskMetrics Group is the leading provider of risk analytics to blue-chip financial institutions, and more recently has established itself as the market leader for hedge fund and other alternative investment managers in effect, the equivalent of a ratings agency for complex securities,” says William P. Collatos, Founder and General Partner of Spectrum Equity Investors. “This investment reflects our confidence in the strength of the management team and the quality of the products, as demonstrated by the company’s growing number of marquee clients. We are very happy to include RiskMetrics Group among our portfolio of information services companies.”
Rene Kern, a Partner with General Atlantic Partners, said the firm was pleased to have become investors in RiskMetrics Group. “As active investors, we look forward to a productive long term relationship working closely with RiskMetrics Group to support and enhance the company’s continued growth both domestically and internationally,” he says.
“RiskMetrics Group is the clear leader in the financial risk management market and the management team has demonstrated a solid knowledge of the sector by continuing to enable customers to accurately measure and manage their risk,” adds Rick Kimball, co-founding general partner of TCV. “We are impressed with the company’s roster of customers and believe RiskMetrics Group continues to set the standard for the financial risk management market.”
Spun-out of JP Morgan in September of 1998, RiskMetrics Group has been growing at a compound annual rate of 65% over the last three years, and is strongly profitable. The new investment will allow the firm to rapidly advance its strategy of delivering a wide range of middle office services such as risk management, data management and risk reporting to asset managers, banks, corporate treasuries, hedge funds, insurance companies, pension funds and regulators.
RiskMetrics allows users to measure and manage risk, and to communicate that risk to clients, investors, shareholders, managers and regulators. Its clients comprise more than 600 of the world’s leading institutions, including nine of the 10 largest financial institutions, half of the world’s central banks, hedge funds, companies in high-tech and consumer goods, and asset managers managing from $100 million to $300 billion in assets.