•  
• Tweet
•  
•        Print
•  
•         Track Keywords
•  
• 

Matthias Knab reports from the GAIM Invest FoF conference in Geneva: Kevin Pakenham, Putnam Lovell NBF Securities, said 2004 was a record year for alternative manager transactions. Nineteen hedge-fund and fund-of-hedge-fund managers were acquired in 2004 representing approximately $40 billion in client assets

In a much noted transaction earlier in 2005, Legg Mason acquired about 80 percent of Permal Group, a major player in the hedge fund industry, for about $800 million. Legg Mason has the right to buy the other 20 percent over the next four years. The price for the entire Permal business is capped at $1.386 billion, with a $961 million floor.

According to a Reuters article, Permal's first fund of hedge funds, Haussmann Holdings, opened in 1973. Last year the firm made $60 million in net income on revenue of $348 million. Permal's long track record and its ties to industry giants have helped the firm attract lots of new money: Assets have more than doubled in the past five years. For Permal the deal provides access to the U.S. -- the largest pool of hedge-fund investors in the world -- where it hasn't been a big player.

The hedge fund sector’s attractive economics like recurring management fees, high performance fees and high operating margins attract “traditional” asset managers that want to participate in this rapidly growing sector.

Mr. Pakenham explained there are fifteen value drivers in asset management companies: