Aberdeen Exec.: Expect More Fund-Of-Funds Deals

Sep 20 2012 | 11:20am ET

The recent acquisitions of K2 Advisors, Prisma Capital Partners and FRM Holdings could be the beginning of a new wave of consolidation in the fund of hedge funds industry, one player suggests.

Aberdeen Asset Management's Andrew McCaffery said that the recent acquisitions—notably Man's purchase of FRM—and continued struggles among funds of funds is likely to force hands, especially among smaller managers.

"Business models when you have got $1, $2, $3 billion are severely compromised when you are a single company," McCaffery, global head of hedge funds at Aberdeen, told Reuters.

"What you have is a number of businesses over the years which have been quite successful, have very good revenues, and now they are finding their performance is being compromised and their high-water mark is out here," he added. Combined with the industry's struggles to garner and retain assets, that could force funds of funds to accept lower valuations than they might want, as FRM did when it sold itself to Man for nothing up front.

McCaffery said that deal has the potential to be a "game-changer."

"In some cases the problem is there may be no price for a deal, because if they carry on like that they undermine the business," he said. "If people leave, assets leave, and if they both leave together it's a very different situation."

In Depth

Q&A: Biotech Investing with Crossover Fund RA Capital

Sep 15 2015 | 5:40pm ET

Boston-based RA Capital Management is an intriguing mix of sophisticated life sciences...


Citadel Supports Manhattan Real Estate With Record Deal

Sep 16 2015 | 3:04pm ET

Never count hedge funds out of a big property deal. The Manhattan real estate market...

Guest Contributor

Hedge Fund Marketing To Independent RIA Firms

Sep 30 2015 | 1:56pm ET

In this contributed article, Bruce Frumerman of Frumerman & Nemeth Inc. explains...


Editor's Note

Upcoming Events