Combination of both the firms will see the creation of a new company with more than $73bn AuM. Credit: Vardan Papikyan on Unsplash.

American asset manager FS Investments has reached a definitive deal to merge its operations with middle-market private asset specialist Portfolio Advisors to create a new alternative investment firm.

FS Investments is currently said to have over $35bn in assets under management (AuM), while Portfolio Advisors oversees $38bn in AuM.

Combination of both the firms will see the creation of a new entity with more than $73bn in AuM.

The consolidated entity will provide institutional and individual investors with various alternative investment solutions.

The deal, which awaits regulatory approvals and other customary closing conditions, is anticipated to be completed by the first half of this year.

FS Investments chairman and CEO Michael Forman said: “This transaction is transformative for FS Investments, accelerating our efforts to broaden our institutional client base, diversify our offerings to include growth-oriented products such as private equity, and deepen our in-house investment capabilities.

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“This combination also enhances our financial profile, diversifies our revenue streams and positions us to invest in further growth.”

The merged entity will offer a number of alternative assets, such as private equity, private and liquid credit as well as private real estate and liquid alternatives.

It will benefit from Portfolio Advisors’ institutional client network and global distribution features across North America, Europe and Asia.

The new firm will also leverage FS Investments’ wealth management distribution capabilities across wirehouse, registered investment advisor (RIA) and independent broker-dealer networks.

In addition, Portfolio Advisors will become FS Investments’ institutional investment unit, with plan to continue to operate from its current locations in Darien, Dallas, London, Zurich, Hong Kong and Singapore.

Both the firms will also have representatives on their senior leadership committees, once the deal is closed.