Philly’s FS Investments builds up in Connecticut private-equity deal to launch $73 billion global business

Philadelphia-based FS Investments, which sells alternative investments to individual investors, has agreed to purchase Darien, Conn.-based Portfolio Advisors, a private-equity investor for institutions such as the Pennsylvania state teachers’ pension fund (PSERS). They have agreed to combine into a single company so they can sell their products to individual and institutional investors.

The combined companies will employ about 500 people and manage around $73 billion. Terms of the acquisition have not been made public by the firms’ owners. They hope to close the deal by June.

Michael Forman, a Philadelphia lawyer who founded FS with Philadelphia developer David Adelman in 2007, will head the combined companies as chairman and chief executive officer. Brian Murphy, cofounder of Portfolio Advisors, will become a senior adviser to the combined firm.

The merger is part of a larger trend, Forman said in an interview.

“Blackstone, KKR, Apollo, Ares, and other [big private equity managers] are moving into retail wealth management,” seeking individual customers to expand beyond the competitive market for pension and other institutional cash. He called FS a “pioneer in democratizing alternative investments” by appealing, through brokers, to individuals.

“I am thrilled to join forces,” Forman added. The deal should make it easier for FS to sell its debt and equity investments to pension funds and other institutional investors, especially at a time when stock and bond investments are coming off a miserable year (2022) and investors want alternatives.

Portfolio Advisors was founded in 1994 as an adviser to pensions and other investment funds before it began selling them its own private-equity products.

The merger comes at a time when private-equity, private-debt and private real estate fund managers such as Portfolio Advisors have been hoping to attract more individual investors to supplement what has become a crowded market for institutional cash.

FS will bring resources to expand Portfolio Advisors’ presence in wealth management. Murphy called it “a unique opportunity to expand our reach.”

FS was launched by its founders in an effort to “democratize” investments in private companies. Its current funds include a range of private credit funds, including business development companies, closed-end funds, real estate funds, and other products.

Besides PSERS, Portfolio Advisors’ public-sector clients include the Missouri and Utah state retirement systems and city workers’ funds in Los Angeles and El Paso.

Portfolio Advisors, which employs more than 130 people and manages around $38 billion, will continue to operate from Connecticut and its branch offices in Dallas, London, Zurich, Hong Kong and Singapore.

FS, which is based in South Philadelphia and has branch offices in New York, Orlando, and Leawood, Kan., manages around $35 billion and employs around 350 people.