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Seeking Alpha – The one trend market pundits seem to collectively be predicting with ease for the hedge fund industry is so-called consolidation.
Which is why a list of the 100 largest U.S. hedge funds, ranked by equity assets, buried deep in Goldman Sachs’ recently released report on the state of the hedge fund industry, caught my late summer-diverted attention.
Among a few of the highlights of the 47-page report: U.S. hedge funds now have net long exposure near levels not seen since before Lehman Brothers’ collapse; that hedge funds now own 3.7% of the financial sector’s market capitalization; that 7% of hedge funds have closed since the financial crisis set in; and that managers collectively boosted ownership in financials by 55% on a quarter-over-quarter basis to $70 billion, with Bank of America the favored stock pick.
Reuters – Equity investors are too negative about the hedge fund industry, says Neptune’s Jeremy Smith, who has recently bought shares in Man Group and expects more consolidation among traditional fund firms.
Smith, who manages the 42 million-pound Neptune UK Equity fund, said that while performance of Man’s flagship AHL managed futures strategy has been poor this year, shares in the world’s biggest listed hedge fund firm still look cheap.
”A lot of fund managers have written off the hedge fund industry but from anecdotal evidence it seems a lot of money is being raised” he said at a briefing with reporters late on Wednesday.
Forbes – Consolidation in the asset management industry is set to intensify as encroaching regulation and client demands for independence force banks to hive off fund arms, Barclays said on Friday.
Major investment banks were finding it ever harder to keep hold of their fund divisions, Barclays President Bob Diamond told a conference call after agreeing to sell Barclays Global Investors to BlackRock for $13.5 billion.
‘The investment management industry is in early days of consolidation… We’ve made a clear decision that this trend is in place for a while and that is around independence,’ he said.
Stuff – The beleaguered hedge fund industry is rife with talk of consolidation, as dwindling asset bases eat into firms’ profits, with the key barriers likely to be hedge fund managers’ egos and poor rewards for sellers.
Man Group and RAB Capital have both indicated they are in the market for smaller hedge funds, while Cheyne Capital and GLG have separately announced deals in recent months.
Reuters Blogs – Finding the right partner can be difficult, which is why matchmaking can be helpful.
That’s precisely what recruitment firm Alpha Search Advisory Partners is attempting to do with its Hedge Fund Consolidation practice, launched today.
The unit, which aims to provide “confidentiality” and which boasts of its “extensive network of potential partners”, will work on behalf of hedge funds “seeking strategic partnerships with other top investment managers” with the aim of cutting costs, creating economies of scale and combining assets under management.
Reuters – Hedge fund and traditional money management firms hard hit by last year’s market meltdown are poised for a surge of mergers and acquisitions to bolster depleted assets and widen sources of revenue.
"We’re going to see a massive wave of consolidation across the entire asset management industry, over the next 12 to 24 months," Brian Reilly, Barclays Capital’s head of asset management investment banking, told a gathering of hedge fund executives at the SkyBridge Alternatives Conference.
LUXEMBOURG (Reuters) – A wave of mergers and acquisitions could sweep the fund management industry this year as players come under pressure from the market turmoil, said speakers at the Reuters Funds Summit.
One leading hedge fund manager added that the consolidation could lead to the disappearance of half of the current hedge fund players.
"I would say that if half had to close, I wouldn’t be surprised," said Ken Kinsey-Quick, head of multi-manager products at London-based hedge fund Thames River Capital LLP.
"The consolidation is happening right now. By summer it will be done and dusted. Those that are going to be around, it will be pretty clear in June who those will be," he added.
Both hedge funds and more mainstream fund management companies have faced having to merge or be taken over due to the effects of the financial crisis, which has led to massive withdrawals of clients’ money.
Reuters – Asia-focused funds suffered their worst ever year in 2008, underperforming their peers in the West, as markets cratered and investors demanded their money back.
This year will be marked by consolidation around more established players and a more conservative approach to using debt to drive investment returns. Investors will also insist on greater transparency and closer attention from fund managers.
