Lyster Watson & Co. has agreed to sell its fund of hedge funds business to Crestline Investors.
Under the deal, details of which were not disclosed, Crestline will buy the management contracts for Lyster Watson's three funds of hedge funds. Lyster Watson founder Robert Watson told Pensions & Investments that it chose Crestline due to the similarities between the two firms' returns and volatility characteristics.
Lyster Watson's funds of funds, which boast a primarily institutional investor base, manage about $300 million.
"As we continue to strategically build our investment management business, this transaction represents a unique opportunity for Crestline to serve clients with compatible objectives and a similar risk profile, focused on achieving consistent low-volatility returns."
It's not clear how many of Lyster Watson's clients will stick with Crestline, although one has already decided against staying: The Auburn Hills Pension Board of Michigan will redeem its $1.5 million investment.
Lyster Watson will retain its $750 million single-manager hedge fund platform. The firm is also building a hedge fund replication business.