Hedge funds have helped drive the 50% surge in mergers and acquisitions involving asset managers to 89 in the first six months of 2006, according Putnam Lovell NBF Securities. The survey found that 22% of all the deals focused on firms that offer alternative investment products, especially ABN Amro Asset Management’s acquisition of International Asset Management and Schroders’ purchase of NewFinance Capital, the two-largest HF-related deals based on assets under management. Rounding out the top five in that group are the Sparx Asset Management acquisition of PMA Capital Management, BBVA Asset Management’s purchase of 51% of Vega Asset Management and Caledonia Investments’ taking a 60% stake in Liberty Ermitage. Altogether, Putnam Lovell found that alternative asset managers represented an estimated $44 billion of acquired AUM.
Interesting, however, is that it wasn’t only hedge funds themselves that spurred the record numbers. According to Putnam Lovell, increased interest in technology companies that cater to hedge funds with products that streamline office functions and trading execution also accounted for the rise in M&A activity. In addition, private equity has been busy in the sector, with Hellman & Friedman singled out as orchestrating the largest management buyout in asset management this year, that of Gartmore Investment Management.
Looking ahead, Putnam Lovell predicted a “rocky adolescence” for hedge funds and funds of hedge funds, “as overeager lawmakers and unkind markets force many to justify their fee structures.” Further, according to the firm, “Larger commitments to more esoteric asset classes, as hedge funds – less alternative by the day – swell to capacity and lose some of their agility in the markets.”