After decades of managing long-only assets, MFS Investment Management is shifting its focus to hedge funds. The long-time Boston-based mutual fund manager is making its foray into the hedge fund space with the formation of a new subsidiary that will provide seed and expansion capital to emerging hedge fund managers.
The new subsidiary, Four Pillars Capital, will be run as a separate entity from MFS. The two entities will not share investment resources, although MFS will provide key operations, marketing and distribution support to Four Pillars.
“Our institutional clients are increasingly demanding alternative investments to complement long-only strategies and diversify their portfolios,” said MFS Chief Executive Officer Robert Manning. “We have created a new subsidiary to provide seed and expansion capital to help talented emerging hedge fund managers build their businesses. Many are looking for support in such areas as operations, marketing and sales, which a relationship with MFS and Four Pillars can help provide.”
Thomas Knott, who co-founded value-oriented hedge fund K Capital Partners in 1998, will serve as president of Four Pillars. Eric Lass, formerly a portfolio manager of K Capital’s Credit Opportunities Fund, will serve as Four Pillars’ chief investment officer.
Four Pillars’ focus will be on hedged strategies that do not rely on the extensive use of leverage or illiquid private securities to generate returns.
“We’re looking for strategies that rely on the manager’s fundamental analytical skill to produce attractive risk-adjusted returns,” said Knott. “Hedge fund failures are commonly the result of operational problems. MFS will provide extensive operational support in addition to state-of-the-art risk management tools to help mitigate this risk.”
As of the end of June, MFS managed $202 billion in individual and institutional assets.