That gobbling noise you hear in the background will continue to grow louder as more and more financial institutions look to build alternative investments into their business the new-fashioned way: They buy it. According to Putnam Lovell NBF Securities, an adviser for such transactions, these institutions have a particular predilection for fund of hedge funds managers and single- and multi-strategy hedge fund specialists.
“We are seeing an unprecedented level of interest by financial institutions seeking to extend their investment capabilities to the alternatives area, and especially hedge funds,” says Putnam President John Griff.
There were 22 such mergers and acquisitions in 2004, 20 last year, with four in the past month or so alone, including ABN Amro Asset Management‘s acquisition of International Asset Management. “Rapid acceptance of hedge fund products as a critical part of a diversified investment portfolio has powered this surge,” says Griff. “Financial institutions are recognizing that without credible capabilities in this area, they will fall behind the competition.” This may actually be a fortunate turn of events for hedge funds looking for something to do with their struggling businesses.