Several institutional investors have bought minority stakes in hedge funds to profit from the management and performance fees earned by them and/or to broaden their investment offerings. In 2010, there were 13 deals worth $1.4 billion. The results have been mixed, to say the least.
Goldman Sachs had invested in Shumway Capital and Level Global. Both funds will not be managing money anymore for outside investors, making the investments worthless. Shumway handled manager succession poorly and Level Global has been embroiled in the FBI's insider trading investigation. Both situations caused investors to pull out their money. On the positive side, Goldman's Petershill Fund has made investments in nine hedge funds. It is planning on buying stakes in 15. Two investments have done very well: Winton Capital Management and Capula Investment Management. Winton has increased assets under management from $10 billion in 2007 to $16 billion in 2011. Capula has doubled assets from $3.5 billion in 2008 to $7 billion in 2011. Eventually, Petershill will be spun out to the public.
Morgan Stanley, who bought FrontPoint Partners for $400 million, has marked the investment down to $30 million. The fund was also hit hard by the FBI's investigation although no one was arrested or indicted. Investors redeemed their cash at the first hint of trouble.
Other deals include Credit Suisse buying 30% of York Capital for $425 million, private equity firms Carlyle Group and Apollo Management buying parts of Claren Road Asset Management and Lighthouse Investment Partners respectively.
On the other hand, smaller funds sell stakes to institutions to access a wider investor base that includes high net worth investors and pension funds. An example of this type of deal is Franklin Resources buying Pelagos ($377 million AUM).
The article can be access at Bloomberg Businessweek.
No comments:
Post a Comment