Global asset manager Legg Mason has acquired RARE Infrastructure, in a deal which has highlighted convergence between traditional and alternative fund houses.

It comes as boutique fund houses increasingly look for partnerships with large asset managers in an attempt to tap their global distribution capabilities.

In the acquisition of the Sydney-based fund manager, Legg Mason Global Asset Management yesterday claimed the deal had “huge” retail investor growth potential.

The sole external shareholder in the listed infrastructure manager – Sydney-based investment firm Treasury Group – claims a 33x return on its initial investment in RARE when the fund manager launched in 2006. Legg Mason confirmed that it paid a A$280 million upfront cash consideration for their 75% stake in RARE, with future payments tied to RARE’s performance.

In an announcement to Australia’s stock exchange (ASX), ASX-listed TRG – which owns a 36% stake – cited a consideration for its stake of approximately A$200 million ($146 million), valuing the manager at up to 5.67% of RARE’s A$9.8 billion AUM.

In contrast, Legg Mason was valued at around 0.9% of its AUM at the end of March 2015 while Australia’s largest boutique alternative asset manager – Platinum Investment Management – is valued at around 13.6% of AUM according to PwC calculations.

Higher valuations for alternatives managers – based on the relatively high management fees that they charge – are attracting more attention from traditional asset managers.

At the same time, boutique fund houses are looking to partner with large asset managers to tap their global distribution capabilities. A Legg Mason spokeswoman told AsianInvestor there are a “lot of people knocking on our door”.

The spokeswoman observed that RARE has a “phenomenal” share – of 46% and 52% respectively – of the retail market for listed infrastructure funds in Australia and Canada, which are the two countries where RARE has made its funds available to retail investors.

This suggests a “huge opportunity” for growth by tapping retail investor demand in Asia, Europe and the US, she added. Legg Mason’s affiliate model will see RARE Infrastructure retain its existing institutional sales capabilities while Legg Mason “offers a global distribution footprint”.

Sydney-based TRG strengthened its distribution capabilities outside Australia last year when it merged with Seattle-based Northern Lights Capital Group, which also invests in boutique fund managers.

That deal saw the two firms combine their interests – at the time – in 21 boutique asset managers in an Australian trust and trustee company called Aurora, with TRG owning 61% and Northern Lights 39%.

When that merger was announced in August 2014, the two firms had A$49.6 billion funds under management (FUM).

Yesterday TRG announced that Aurora’s FUM had declined to A$49 billion in 19 boutique asset managers as of the end of June 2015.

That was a A$2.7 billion decline in the trust’s end-March 2015 FUM, contributing to a 5.95% decline in TRG’s share price yesterday.

RARE is the largest asset manager which TRG and Northern Lights own a stake in, accounting for 20% of FUM.

Spokespeople for TRG and RARE declined to comment further on the value of the transaction, which sees the 64% stake owned by employees of RARE decline to 15%. TRG holds onto a 10% stake in RARE, which it has an option to sell to Legg Mason – and Legg Mason has an option to buy from it – two years after completion of the transaction which is expected to be before November 2015.