Hedge fund managers are exploiting the post-crisis period to find buyers and sellers, as well as talented investment and client service teams
Hedge fund managers are exploiting the post-crisis period to find buyers and sellers, as well as talented investment and client service teams.
Managers of hedge funds and funds of funds are holding court, considering minority, majority and 100% stake offers from a wide variety of financial services companies and private-equity managers that have been actively pursuing acquisitions over the past few months, confirmed Daniel Celeghin, a partner at Casey Quirk & Associates LLC, a consultant to money managers.
Eric C. Weber, managing director and chief operating officer of investment bank Freeman & Co. LLC, agreed: “The level of discussion has been picking up in the last few months, now that it's clear who survived the storm. More conversations now likely will lead to more deals next year,” he said.
A number of broad needs are driving what sources call a significant increase in activity by both sellers and buyers, cash for business growth, new investment strategies, investment and institutional marketing talent in new geographic areas and expertise in specific investment strategies.
Larger hedge fund managers, including York Capital Management Global Advisors LLC, are motivated to sell stakes by the desire for cash infusions or to tap into a larger company's distribution network.
York Capital, an event-driven and credit-focused specialist with $14 billion under management, accepted Credit Suisse Asset Management's LLC offer of an initial $425 million for a minority stake. Terms were not disclosed.
Other hedge fund managers including Polar Capital Partners Ltd. and FrontPoint Partners LLC, each of which maintains multistrategy platforms to which investment teams are added through liftouts or acquisitions, are taking advantage of the desire by investment teams or smaller hedge fund companies to find a strong partner.
“There are huge opportunities right now to hire portfolio managers and investment teams we wouldn't have been able to touch pre-2008,” said James Brandt, sales and marketing director of Polar Capital.
In just the past two months, Polar Capital has acquired HIM Capital Holdings Ltd., which manages $230 million in a specialist financials sector fund; added a global emerging markets investment team through the liftout of a team from Axa Framlington; and formed a global convertibles team through the hire of a team from Vicis Capital LLC.
Polar Capital managed $3.1 billion as of Oct. 31, 35% of which was from institutional investors.
BENEFITS FOR BOTH
Among the deals that brought the buyer both hedge fund expertise and exposure to new markets, while giving the seller access to significant marketing teams, was the acquisition of BlueBay Asset Management PLC, a credit and fixed-income specialist hedge fund manager, by Royal Bank of Canada for $1.34 billion. BlueBay manages $40 billion in assets.
Several large money management companies bought hedge fund businesses to plug gaps in their investment strategy spectrum, including AllianceBernstein LP, which added $8 billion of hedge and private-equity funds of funds when it acquired SunAmerica Alternative Investments in a deal that closed in October. Terms of the deal were not disclosed.
Another such deal involved alternative-investment manager Altegris Advisors LLC — with about $2 billion under management — being acquired by Genworth Financial Inc. for $35 million.
Mr. Celeghin said more deals are still being considered and many buyers and sellers got “very close to the altar without actually getting married” over the past few months.
One of the easiest deals to execute lately is the kind that Credit Suisse Asset Management negotiated with York Capital, he said.
“For big hedge funds, when a buyer comes forward with a lot of cash seeking a minority stake and no controlling interest, there's not a lot of downside for the hedge fund manager — not many reasons to say no,” Mr. Celeghin said.
“None of the biggest hedge funds will say, "We're not for sale.' They may not be actively engaging investment bankers or be out there seeking stake takers, but they're willing to talk about it,” Mr. Celeghin noted.
A wide variety of hedge fund, hedge-fund-of-fund and alternative-investment managers are eagerly trolling through rich pickings and adding to their investment arsenal through a variety of arrangements, from seeding new teams and joint ventures to shared economic arrangements and outright talent raids.
“The name of the game right now is consolidation and convergence between traditional and alternative-investment managers. Everyone is looking at everything,” said Matt Jabinsky, director of the hedge fund and alternatives practice at executive recruiter Sheffield Haworth Inc.
Christine Williamson is a reporter at sister publication Pensions & Investments.
