Models Compete-Man, Investcorp, Blackstone

Chidem Kurdas

Man Group’s acquisition of GLG Partners, with $24 billion in assets, brought up questions about the future of alternative investment businesses.  For growth, is it better to rely more on mergers and acquisitions or wait for investors to come? Do companies with diverse strategies have an advantage?

Acquisitions have always loomed large for Man Group, which made several major purchases in the past 10 years, notably acquiring Swiss-based RMF and US-based Glenwood, both fund of funds. AHL, the famed futures trading group that manages a large portion of Man’s assets, was also acquired.

London-listed Man sells notes based typically on a combination of managers. These products have a large retail market—but not in the US. The substantial retail base differentiates Man from other hedge fund firms. GLG will add to the retail side, but not primarily in the US, which is Man’s goal according to reports. Last year GLG bought Société Générale’s long-only asset management  business in the UK.

Other alternative investment managers have pursued a different model. For instance, Blackstone, Fortress and Investcorp contain large private equity operations as well as hedge funds. In that sense they are more diversified, combining liquid hedge fund strategies with locked up private equity funds—in the credit crisis, those established lock-ups protected the assets from redemption. Another difference is that the investors are more institutional compared to Man’s.

Blackstone Group recovered robustly from the slump, with fee-earning assets at $98 billion as of April, up from $92 billion a year ago. According to chief executive Stephen Schwarzman, Blackstone, as the largest and most diversified alternatives manager for public institutions, is “very well positioned to take advantage of opportunities in a reviving world.”

That suggests that while Blackstone might take advantage if an attractive M&A situation develops, it is growing organically without need for buying assets.

Investcorp says it raised $1 billion in new money for its fund of funds and single hedge funds, much of it from US institutions, bringing hedge fund assets to $4.4 billion (not counting private equity funds.) The firm recently hired executives, Nick Vamvakas and Brian Rice, to help raise money.

Fortress Group raised over $1 billion in the first quarter, but the net effect of the inflow was minor because of continuing redemptions and distributions from special vehicles set up in the crisis.  The firm recently acquired bond manager Logan Circle, increasing total assets to 41.6 billion.

Blackstone looks to be the winner, but it’s a continuing race.

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