NEW YORK — The hedge fund industry is due for a big shake-up in the next couple of years as small firms with paltry assets under management exchange independence for infrastructure and distribution.
That's the view in a report on hedge fund merger and acquisition activity scheduled for release early next year by investment bank Freeman & Co. LLC, New York, which strongly suggests a surge in hedge fund consolidations.
By contrast, a pair of investment bankers who specialize in alternative investment management deals — Ted Gooden and Torjus Berge, vice presidents at Berkshire Capital Corp., New York — are less convinced the shake-up will manifest as outright consolidation among hedge funds. Instead, Messrs. Gooden and Berge predict that a range of partnership structures will be set up as larger hedge funds buy up revenue stakes in promising startups, firms take equity stakes in each other to gain distribution clout, and hedge fund-of-funds managers hit a brick wall in terms of profitability.
In fact, the Berkshire duo thinks it far more likely that consolidation will take place among unprofitable hedge fund-of-funds managers than between hedge funds themselves.