‘Thrilling’ Returns for Investors as Riskalyze Recapitalizes

Angel investors got 50 times what they invested in the software company, Riskalyze co-founder and CEO Aaron Klein told RIA Intel. Others made out well, too.

(Illustration by RIA Intel)

(Illustration by RIA Intel)

Riskalyze, the risk management and trading software company used by thousands of financial advisors, said Wednesday it had recapitalized in a deal that its chief executive called “thrilling” for investors.

Hg, a London-based private equity firm with $37 billion under management that’s focused on software companies, invested in Riskalyze for the first time and became the majority shareholder of the private company. Riskalyze co-founders and management, including CEO Aaron Klein, who said he reinvested most of his holdings, also participated in the recapitalization of the company founded in 2011.

The transaction, expected to close in September, is subject to customary closing conditions and regulatory approvals. Hg’s Sebastien Briens, Max Dewez, and Richard Earnshaw will join the Riskalyze board after the deal closes and additional board members are expected to be announced soon.

Klein, who will remain CEO and a member of the Riskalyze board of directors, declined to share what his company was valued at in the deal. But it was “a thrilling outcome for all of our investors,” he said.

Early angel investors received a “blockbuster” 50 times what they invested in the company and more recent ones received 21 times, Klein told RIA Intel.

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FTV Capital, a private equity firm that led a $20 million minority investment in Riskalyze in 2016, has sold its stake in the company and is no longer a shareholder. The firm received more than four times what it invested, Klein said.

Riskalyze and its new majority owner said they share a vision for the software company and a perspective on the wealth management industry. Wealth managers are increasingly considering each client’s investment performance and financial plan together, with risk at the center, and Riskalyze has benefitted. More than 90 percent of advisors don’t use a specific risk solution and among those that do, Riskalyze has the largest market share, according to Klein.

In addition to smaller wealth managers, Riskalyze has recently attracted large enterprise clients. This year it has partnered with Cetera, a firm with over 8,000 affiliated advisors managing more than $80 billion; Atria, a holding company whose subsidiaries have 2,500 advisors; and Hightower, one of the largest independent RIAs with 115 practices managing an aggregate of more than $100 billion.

Riskalyze doesn’t consider its trading platform a turnkey asset management platform, but with $18 billion, it would be among the largest.

“Riskalyze has seen significant momentum in the last few years. The team have successfully established themselves as providing a best-in-class [software as a service] tool that solves real business challenges in a sector still seeing increasing tech adoption,” Dewez, a director at Hg in New York, said.

Auburn, California-based Riskalyze has 170 employees. The company says its platform supports “tens of thousands” of advisors who manage millions of client accounts with an aggregate of more than $400 billion in assets.

Michael Thrasher (@Mike_Thrasher) is the editor at RIA Intel and based in New York City.

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