Man Group to buy hedge fund business

Man Group is set to pay up to 142.8 million dollars for FRM Holdings, a global hedge fund research and investment specialist.

Man and FRM's combined multi-manager business will have total funds under management of approximately $19bn, making it the largest independent non-US based fund of hedge funds.

The hedge fund will pay nothing up front, instead with will pay a maximum of $82.8m in cash, net of total net assets it acquires.

MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Dependent on asset retention, it will also pay out a 47.5% share of performance fees attributable to FRM's existing funds under management over three years, up to $60.8m.

"By combining the complementary investor bases of the two businesses and pairing FRM's well regarded investment process with Man's managed accounts infrastructure, we can increase revenues with no material change to Man's current cost base," said Man's Chief Executive Peter Clarke.

"The transaction has been structured so that the consideration adjusts in line with asset retention, to ensure an attractive return for our shareholders."

The company said that the deal would achieve cost savings of $45m a year from operational synergies in the combined group, which in turn would generate double digit growth to Man's adjusted management fee EPS in 2013.

The internal rate of return from the acquisition is expected to be well in excess of Man's cost of capital, it said.