Insurance giant Principal Financial Group has agreed to buy a majority stake in hedge fund Finisterre Capital, the firm's first foray into hedge funds.
Principal's investment division, Principal Global Investors, will pay up to US$115 million for the 51% stake in London-based Finisterre, which has US$1.63 billion in assets under management. Finisterre's five partners, lead by Paul Crean, chief investment officer, will remain with the firm and will continue to make all investment decisions, Principal said. The five will retain a "significant minority stake" in the emerging markets specialist and will invest a "significant share" of the proceeds from the sale in Finisterre's funds.
"We would expect their assets to grow significantly in the coming years, as a result of our partnership," Nick Lyster, CEO of Principal Global's European business, said.
"There is already an enormous appetite to invest in emerging economies and we firmly believe the demand will continue as these markets develop," Principal Global CEO Jim McCaughan said.
Principal will pay US$84.6 million for its share of Finisterre up front. Depending on the group's performance, it could make further continent payments of as much as US$30 million in two years.
The insurer, which has US$232.4 billion in assets under management, is paying for Finisterre with some of the US$700 million it has set aside for acquisitions. Just last week, it also dipped into that kitty to buy HSBC Holdings' Mexican pension business.
For its part, Finisterre plans to launch a new stock fund at the end of this year or the beginning of next, with Principal potentially serving as seeder.