Principal Eyes Fund Of Funds After Hedge Fund Buys

Apr 10 2012 | 1:08pm ET

Principal Global Investors' expansion hasn't ended with its acquisition of majority stakes in hedge funds Finisterre Capital and Origin Asset Management. The asset management arm of insurance giant Principal Financial Group plans to add other asset classes to its stable—starting with a fund of hedge funds.

PGI CEO Jim McCaughan is focused on finding a fund of funds manager to buy, hoping to replicated the success of Man Group and Lyxor Asset Management's fund of funds platforms.

"I'd heard Jim was interested in a fund of funds business," an investment banker told Financial News. "They make up a sector that relies on institutional money and he has links with no end of potential clients. He is happy to buy into relatively small managers, in the belief that he can help them grow."

McCaughan himself told FN that PGI "are interested in funds of hedge funds, where we can be certain they add value in terms of selection and structure." PGI is also eyeing infrastructure managers, but with less hunger: "The area is quite complex," McCaughan said.

Last year, PGI bought controlling stakes in two London hedge funds, Origin and Finisterre, for a combined US$150 million. Parent PFG is expected to spend up to US$900 million on acquisitions this year.


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