Morgan Creek acquires Signet
Morgan Creek Capital Management, the US asset manager, is to acquire the $700 million funds of funds business of fixed income specialist Signet Capital Management as the industry continues to consolidate.
The deal, which is subject to regulatory approval, is expected to close in the second quarter. Senior management at Signet including founder and co-head of investment management Robert Marquardt, and Dr Serge Umansky, CEO and co-head of investment management, will continue in their existing roles.
The merger will enable Morgan Creek Capital Management to leverage Signet’s fixed income expertise. It will also give Signet an opportunity to boost its US client base while enabling Morgan Creek to tap European money through Signet’s own distribution channels.
The M&A activity in the funds of funds space has been on-going since the financial crisis with the asset class struggling to post decent returns until relatively recently. Nonetheless, there has been a slight recovery in funds of funds’ performance with gains of 4.2% in 2012, while Hedge Fund Research data states the average fund of funds is up 4.10% year-to-date 2013.
However, this has not stymied the fall in AuM at funds of funds globally, which has declined from its $1.2 trillion peak in 2008 to approximately $810 billion in 2013, according to data from Preqin. Preqin added there just 59 funds of funds launches in 2012 compared with 142 in 2010. This decline is mainly attributable to investors putting capital to work at hedge funds directly, or via investment consultants.
This decline has facilitated an M&A boom in the funds of funds space. In 2012, it was announced Permal would acquire Fauchier Partners from BNP Paribas Investment Partners creating an investment firm running $24 billion. However, the largest deal in 2012 was Man GLG’s acquisition of FRM, the $8 billion fund of funds. The venture between Man GLG and FRM created the biggest fund of funds outside of the US with approximately $19 billion AuM. Man GLG paid $82.8 million for FRM contingent on FRM retaining assets.
A survey by Credit Suisse prime brokerage in 2012 said 43% of funds of funds wanted to be acquired, a massive jump from 23% in 2011.