A Start-Up Bets That Mega Firms Don’t Have the Stomach for Innovation

Industry veterans Gabriel Hammond and Dave Saxena are getting back into the asset management business — this time betting they’ll be able to compete with larger firms by providing access to new and non-traditional investments.

Their new manager, called Emles Advisors, is focused on both institutional and retail investors and owned entirely by employees. It is initially offering a lineup of exchange-traded funds.

Hammond, who started his career in Goldman Sachs’ energy and power group, founded Alerian Capital Management in 2004. Saxena was Alerian’s CFO.

Alerian created investment products for master limited partnerships, which are publicly traded vehicles similar to real estate investment trusts. Alerian also created the industry benchmark index for MLPs.

Hammond founded SteelPath MLP funds in 2009, which went on to develop the first MLP mutual fund and MLP ETF. Hammond sold SteelPath in 2012 to OppenheimerFunds and had a five-year non-compete. He sold Alerian in 2018 to a group backed by Goldman Sachs.

In an interview withInstitutional Investor,Hammond said he and Saxena have a history of sourcing and creating new asset classes that most investors couldn’t previously access. While Alerian and SteelPath were focused solely on one sector, the new firm will offer a broad range of products in equities, fixed income, and private markets.

Hammond laughed when asked about launching a firm during a global pandemic. It wasn’t part of the plan, he said, adding that overseeing Alerian through the global financial crisis ultimately led to a lot of innovation.

“I thought I was going to go bankrupt during the crisis,” he said.

After unsuccessfully looking for a buyer for Alerian, Hammond ended up creating the first mutual fund for MLPs.

Start-ups are the right place to create something new, he said. “The big firms don’t want to spend $1 million in legal fees for a 35 percent chance it’ll go through. We created the first MLP index. It wasn’t necessarily a brilliant idea, but the banks didn’t want to pay for it,” he added.

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The firm’s ETFs include new offerings, such as real estate credit. The ETF provides exposure to conservative, investment-grade fixed income that supports equity REITs. “Shockingly, that doesn’t exist,” he said. “These are not double-digit yielding mortgage REITs. That’s not us.”

Chief investment officer Agam Sharma joined Emles from PineBridge Investments, where he led the $14 billion multi-asset business’ global client capabilities. Other Emles investment professionals include Emanuel Zareh, senior vice president of investments and research, who was the former founding member at hedge fund Bayfield Court Capital Management; Yevgeniy Shelkovskiy, portfolio manager, who joined from Bank of America Merrill Lynch; and Rachel Deinhart, portfolio manager, who was previously at The Carlyle Group.

The firm is exploring the ins and outs of offering public and private funds that could include everything from digital assets to esoteric, cash-generating private equity. It is already having conversations with regulatory officials about putting private assets, including alternative credit, into ETFs.

“But it will take time,” Hammond said.