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Goldman Sachs buys stake in hedge fund Level Global Investors as global acquisition trend continues

Tuesday, April 06, 2010
Opalesque Industry Update – Goldman Sachs’s Petershill Fund Offshore LP, a $1bn private equity fund set to buy minority stakes in hedge funds, bought a marginal stake in New York-based Level Global Investors, a $4bn hedge fund run by David Ganek.

In a letter sent to investors, Ganek said proceeds from the sale would be used to attract and retain top clients, reported Bloomberg on 2nd April.

A hedge fund manager from Zurich told Opalesque: “[These are] good signs for our start-up, as risk capital is leaving the investment banks for direct investments.”

Under the agreement, Goldman Sachs will not have an investment decision-making role.

Petershill Fund earlier bought into Capula Investment Management, Shumway Capital, Trafalgar Asset Management and Winton Capital Management according to Hedgefund.net.

Ganek is a former employee of Steven Cohen’s SAC Capital Advisors LLC. He founded Level Global Investors in 2003 and his company now employs 43 staff, including 25 investment professionals.

Trend

Goldman Sachs’ foray follows an industry trend of investment banks and wealth managers investing into hedge funds.

The shift in trend was predicted by equity analysts KBW who said early this year that now is the time to buy asset managers as flows of new money into equity funds are expected to be subdued and uncertain in 2010, which could lay the groundwork for a contrarian bet on asset management stocks.

Research made by global accounting consulting firm KPMG recently showed that private equity dealmaking had rebounded in the first quarter of 2010 to its highest level since Lehman Brothers collapsed, highlighting how UK buy-out bosses are expecting an economic recovery.

Early this month, Credit Suisse disclosed plans to buy a minority stake in the $12bn York Capital hedge fund, as Wall Street anticipates big financial firms to continue owning hedge fund stakes.

Two weeks ago, UK asset manager Standard Life Investments (SLI) bought a 75.1% stake in FoHFs manager Aida Capital to provide the group’s clients access to a wider range of alternative assets, Investmentweek.co.uk reported. SLI already manages around $211bn in commercial property, private equity and global absolute return strategy funds.

Other acquisitions involve Sanlam Investments, a large South African investment and wealth management firm, which bought Swiss FoHFs Octane Holdings and raised its stake in South African hedge fund Blue Ink Investments from 50% to 75% in January this year.

JPMorgan Chase & Co. held preliminary talks with Arminio Fraga in February to buy a minority stake in the Brazilian hedge fund firm Gavea Investimentos Ltda.

UK Financial services company Northern Trust Corp. expressed last month its desire to buy a fund administrator or an asset manager.

UK-based Collins Stewart Wealth Management also completed a deal to acquire Corazon Capital, an asset manager based in Guernsey and Geneva, last month.

– PD & BG

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