TWO FORMER JP Morgan traders who set up their own hedge fund in 2000 each pocketed pounds 25m yesterday when they sold a stake in their asset management business to Man Group, the FTSE 100 hedge fundmanager.
Man is paying pounds 105m in cash and shares for a 25 per cent stake in the London-based group BlueCrest Capital Management, which runs pounds 1.8bn through funds investing in complicated fixed income and currency derivatives.
Mike Platt and Bill Reeves, BlueCrest’s founders, are believed to own a majority of the company between them, while other managers also have equity stakes. The pair left JP Morgan three years ago, running the new business from offices in St James’s, in London’s West End.
BlueCrest employs 50 people, but is secretive about its partnership structure. Neither BlueCrest nor Man would comment on its ownership yesterday. The company made an estimated pounds 30m profit in the past 12 months.
Man is paying pounds 3.3m in cash and issuing 4.9 million shares – which fell a penny to 1,451p yesterday – for a stake in BlueCrest and privileged access to its funds. It already invests some of its funds with the company, and was approached by BlueCrest with the offer of a stake after Mr Platt received a takeover approach from a rival.
Stanley Fink, the chief executive of Man, said the special access to BlueCrest funds would help ease fears that the company was running out of places to invest the funds that it was raising.
Man Group now manages pounds 18.6bn on behalf of clients and has had a record year for its fund sales as wealthy individuals and institutions pursue hedge funds as an alternative to traditional equity investment. “There was a danger our sales were going to outstrip capacity,” Mr Fink said.
The acquisition helps Man move into new areas of trading, away from more traditional hedge fund activities where too many managers are chasing too few money-making opportunities. Fixed income derivative trading has enjoyed explosive growth, as the ballooning profitability of Icap, the inter-dealer broker of such products, testified yesterday.
Man may look to take full control of BlueCrest if it proves the business can attract institutional investors as clients, but Mr Fink said the current arrangement ensured that Messrs Platt and Reeves remained highly incentivised and would continue the business’s rapid growth. Mr Platt said: “This transaction demonstrates our commitment to building a first class alternative asset management group.”
BlueCrest is one of a wave of hedge funds started in London by former investment bank traders, lured away by the prospect of an equity stake in their own business.
