FolioDynamix acquires Summit Advisor Services for $6 million in wake of Aequitas collapse

Summit Advisor Services, a turnkey asset management program, was partially owned by an Aequitas venture. That company had been charged by the SEC with running a Ponzi scheme.

The failure of alternative investment manager Aequitas Capital Partners continued to ripple through the investment community this week as FolioDynamix acquired adviser technology firm Summit Advisor Services.
Dallas-based Summit Advisor Services, a turnkey asset management program, was 21.5% owned by an Aequitas venture, the Aequitas Capital Opportunity Fund. Aequitas Capital Partners is being liquidated and the Securities and Exchange Commission alleged in March that its executives were running a giant Ponzi scheme that fraudulently raised up to $350 million from 1,500 investors.
Some of those funds were invested through financial advisers.
(More: A clear view of alternative strategies is a challenge for financial advisers)
FolioDynamix announced the deal on Wednesday and paid about $6 million for Summit Advisor Service’s assets, or about 1.5 times revenue, according to Michelle Musburger, spokeswoman for Actua, FolioDynamix’ parent. The firm agreed to pay more going forward depending on performance, she said.
“There was nothing wrong with their business,” said Joe Mrak, chief executive of FolioDynamix, about Summit. “But it hurt them when they got tied up with Aequitas.”
It helped FolioDynamix, though, to buy Summit’s business for a good price, he said.
Summit’s focus on providing a technology offering to registered investment advisers was attractive to FolioDynamix, which currently concentrates on selling technology to independent broker-dealers, such as LPL and Raymond James, as well as banks.
Summit had about $2 billion in assets on its technology platform, while FolioDynamix boasts about $700 billion.
A year ago Aequitas told investors it could not meet scheduled payouts due to liquidity issues, and then fired most of its employees in early 2016. The Lake Oswego, Ore.-based investment firm announced in February it had hired an outside consultant to oversee liquidation of assets and investment funds. Aequitas’ investments focused on subprime credit through buying student loans and health-care debt.
The SEC complaint alleges from January 2014 until January 2016, executives at Aequitas sold $350 million in promissory notes to investors who were told to expect 5% to 15% returns. But the “vast majority” of the money was used to repay prior investors and pay operating expenses of Aequitas, the SEC alleged.
Much of Aequitas’ troubles stemmed from investments in Corinthian Colleges’ student loans. Corinthian Colleges closed in April 2015.
The Consumer Financial Protection Bureau sued Corinthian Colleges in September 2014, alleging the for-profit educational institution convinced students to take out loans to attend the school by advertising false job opportunities and career services.