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Hedge fund consolidation has only stalledPosted by Retirement on: 2005-09-16 12:33:14 in category:
Investments [ Print | Permalink / 0 Comment(s) ] By Pratima Desai NEW YORK (Reuters) - Takeover deals in the hedge fund industry appear to have stalled for the time being, but older managers looking to retire are likely to trigger more consolidation, speakers at the Reuters Hedge Fund Summit said this week. At the start of 2005, analysts had expected many hedge fund firms to seek a stock market listing, or even sell themselves to big financial companies and make good their strong performances of previous years. But poor returns so far this year and negative publicity surrounding the collapse of credit markets in May have held back many star performers from making a lucrative exit. "It hasn't been that big a trend," said John Paulson, founder of hedge fund Paulson & Co. "But I think as the industry matures, we'll see more consolidation and perhaps more publicly listed (hedge fund) companies." The most recent high profile listing was that of Rab Capital Plc (RAB.L: Quote, Profile, Research) last year in London and in June U.S.-based asset manager Legg Mason Inc. (LM.N: Quote, Profile, Research) said it would acquire the Permal Group, one of the world's largest hedge fund firms. Investment banks looking for alternative revenue streams have also made forays into the world of hedge funds. Examples include U.S.-based JP Morgan Chase & Co.'s (JPM.N: Quote, Profile, Research) purchase last year of a majority stake in hedge fund firm Highbridge and more recently Lehman Brothers Holdings Inc. (LEH.N: Quote, Profile, Research), which bought a 20 percent stake in hedge fund firm Ospraie. "I do see large financial institutions who can't attract that capability continuing ... to buy hedge funds and funds of hedge funds," said Jane Buchan, chief executive officer of Pacific Alternative Asset Management Co. "A lot of these large hedge funds are being run by people who are now approaching their late 40s ... do they turn it over to junior or do they try to monetise?" Earlier this year, Stanley Fink, chief executive of the world's largest listed hedge fund firm, Man Group Plc (EMG.L: Quote, Profile, Research) said he expects around 40 to 50 hedge fund firms to seek a stock market listing over the next 5 years to 10 years. PRETTYING UP Many managers are investing in infrastructure and compliance to make their firms more marketable to potential investment bank, fund managers or equity buyers. Some are also trying to become more open about their businesses, strategies and investments. "Selling a hedge fund is a hard thing to do," said Buchan. "A lot of bankers are running around trying to get people to go public." But a key problem could be valuing a hedge fund business. Analysts say working out a fair value of these businesses can be tough, especially because of their reliance on volatile performance fees and dependence on one or two key managers. Hedge funds typically charge up to 20 percent performance fees and 1 percent to 2 percent annual management fees. Speakers at the Reuters summit said many of the new listings will be funds of hedge funds, which invest in a variety of hedge fund strategies, do the due diligence and monitor performance. "First you will see funds of funds get listed," said Mark Yusko, president and chief investment officer of hedge fund firm Morgan Creek Capital Management. "The reason that makes sense is because one way to manage risk is diversification ... you can build a portfolio of hedge fund managers, the way you build a stock portfolio or a mutual fund ... One stock is risky, but if you buy a whole bunch of stocks that's less risky." Data providers estimate funds of hedge funds manage more than half of the $1 trillion invested in the industry. Homepage Please support are sponsors. To design you custom retirement plan. http://www.retirement-plan.us For planing a IRA rollovers. http://www.ira-rollover.us Professional asset allocation and the wonders it can do. http://www.asset-allocation.us Professional money management: National ranked performance. http://www.roth-ira.us Managers selected to fit your needs. http://www.money-managers.us |
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