Bermudian-based holding company Assured Guaranty Ltd has entered into a wide-ranging agreement with Sound Point Capital Management LP, the US-headquartered alternative asset management firm, that it says will “significantly benefit” both parties.

Under the agreement, Assured Guaranty will contribute its entire equity interest in Assured Investment Management LLC and, with certain exceptions, its related asset management entities (collectively, AssuredIM) to Sound Point.

In addition, US insurers Assured Guaranty Municipal Corp and Assured Guaranty Corp will engage Sound Point as their sole alternative credit manager to invest $1 billion over time in alternative credit strategies, including nearly $400 million currently managed by AssuredIM as of December 31, 2022.

In exchange, Assured Guaranty will receive a 30 per cent ownership interest in the combined business, subject to potential post-closing adjustments.

Assured Guaranty acquired AssuredIM, formerly BlueMountain Capital Management LLC, in October 2019.

AssuredIM will transfer assets under management of approximately $15.2 billion, including approximately $14.5 billion of collateralised loan obligations, as of December 31, 2022, to Sound Point upon completion of the transaction.

As a result, Sound Point, which had approximately $21.4 billion in CLOs and $32 billion in total AUM as of December 31, 2022, is expected to become the fifth largest CLO manager by AUM in the world.

Dominic Frederico, president and CEO of Assured Guaranty, said: “We expect this transaction to significantly benefit both Assured Guaranty and Sound Point and to be accretive to Assured Guaranty’s shareholders.

“Our investment in Sound Point should provide significant incremental value because the combined business will benefit from Sound Point’s scaled investment platform, as well as both firms’ established distribution channels and well-earned reputations for generating attractive returns for their investors.”

Mr Frederico added: “This combination further advances two of the objectives we set out when we entered the asset management business.

“The first objective was to establish a fee-based earnings stream independent of the risk-based premiums generated by our financial guaranty business.

“To accomplish this, we converted virtually all of AssuredIM’s assets under management into fee-earning AUM.

“Our 30 per cent investment in the combined firm will advance this earnings diversification strategy through a compelling investment management business that is expected to grow and generate significant net income and free cashflow.

“The second objective was to enhance the alternative investment opportunities for our financial guaranty subsidiaries’ investment portfolios.

“AssuredIM was successful in meeting this objective, and we’re confident Sound Point’s proven track record managing such investments will be strengthened by the addition of AssuredIM’s AUM.”