Alternative fund managers converge
The advantages of sharing specialist industry sector information drawn from private companies, plus a desire to provide complementary asset allocation vehicles to end investors, are drawing private-equity firms and hedge funds into alliances. Private equity firms are hoping to capture some of the client money rushing into hedge funds a number of which are now bidding for whole companies. Julie Dalla-Costa reports.
PRIVATE-EQUITY FIRMS are increasingly recognizing that there is a crossover between their traditional business of buying and selling whole companies and hedge fund-style investing. End investors are beginning to class both of these sectors together as alternative investments.
Bain Capital and Blackstone were early to expand into hedge funds, and several other large private-equity firms have recently formed ventures with hedge fund managers or have acquired hedge fund businesses. US firms have been keener on this kind of strategy than European players and those that have already undertaken it, or plan to do so, include private-equity fund of funds Hamilton Lane, Texas Pacific Group and The Carlyle Group.
The advantages of cooperation between private-equity and hedge funds businesses include the ability to share information about sector trends and the markets and to attract investors looking at both kinds of alternative vehicles. The private-equity groups can also benefit from continuing strong inflows into hedge funds and attractive, recurring fees.
But, there are conflicts of interest that need to be avoided.
At the beginning of last month, Hamilton Lane, one of the largest private-equity funds of funds globally, with more than $34 billion of discretionary and non-discretionary assets under management, took a majority interest in $1.5