New Firm Will Buy Up Small-, Mid-Sized Hedge Funds

Feb 7 2011 | 9:57am ET

A group of hedge fund industry veterans are poised to build a new multi-strategy conglomerate, although not exactly from scratch.

The people who brought you Tuckerbrook Alternative Investments hope to raise about $250 million for their latest venture, Aveon Group. Aveon plans to use that money to buy controlling, if not majority, stakes in nine hedge fund firms, creating, at a stroke, a multi-strategy boutique.

The firms set to become part of the Aveon group include Banyan Capital Management, CastleRock Management, Glenrock Asset Management and Viridian Partners. Combined, the nine firms will have about $3 billion in assets under management.

Aveon believes that combining a group of smaller managers—widely believed to perform better than larger shops—into a multi-billion firm with better infrastructure and lower operational risks will be irresistible to institutional investors, which might otherwise shy away from smaller managers.

Marblehead, Mass.-based Aveon is set to list on the New York Stock Exchange tomorrow, selling about 16 million shares for between $14 and $16. It will buy 30% stakes in the hedge funds in which it invests, although it will leave management of each funds' strategy in the hands of its current management.

Aveon's initial public offering prospectus does concede that a risk of investing with it is if those existing managers leave, but did say it would have legal recourse if key employees were to exit.


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