Pensions Buy Managers’ Public Shares

One way to get a piece of hedge fund and private equity returns is to hold common stock in certain publicly traded asset management companies. Public pensions do this with a few names, in particular Affiliated Managers Group.

Affiliated has been around since the mid-1990s. Its business model is to own equity stakes in a growing number of investment managers for which it provides marketing, technology and operations while the managers concentrate on investing. Many of these managers pursue conventional strategies but Affiliated also has holdings in hedge fund and private equity firms AQR, BlueMountain, ValueAct and Pantheon.

The combined assets of the managers Affiliated owns increased substantially in the third quarter to $294 billion as of September 30, from $250 billion at the end of  June.

Two large public pensions, New Jersey State employees pension and Oregon Public Employees Retirement Fund, have bought Affiliated stock.

Getting exposure this way has the advantage of liquidity over private investments in the underlying funds, says an investor.

Affiliated represents diverse strategies but it is possible to get pure private equity and hedge fund exposure by buying the shares of Blackstone, Fortress or Och-Ziff—-you’ll remember that all three went public before the 2008 crisis got in the way of IPOs.


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