The hedge fund-of-funds industry might be buzzing about which firm will be the next to succumb to the lure of a rich buyer, but for A-list companies, it's all just talk so far.
Among the hedge fund-of-funds managers that investment bankers and other sources said are at the top of the wish lists of acquirers — because of their institutional orientation — are Rock Creek Group and the lucrative minority stake that TA Associates Inc. holds in K2 Advisors LLC.
Other institutional hedge funds of funds that are getting a lot of scrutiny from potential buyers are Mesirow Advanced Strategies Inc., Dorchester Capital Advisors LLC, Arden Asset Management, Archstone Partners, Commonsense Investment Management LLC and investment outsourcer Strategic Investment Group, which manages a substantial hedge fund-of-funds portfolio.
Potential buyers are large, diversified financial services companies that need to add hedge fund capabilities “but find that they aren't quite ready to buy a single- or multistrategy hedge fund,” said Daniel Celeghin, a partner at Casey Quirk & Associates LLC, Darien, Conn., a consultant to money managers. “There's more interest from many buyers in hedge funds of funds because, frankly, they're less scary than hedge funds.”
What these acquisition-hungry firms want are proven asset gatherers with traction in the institutional investment community.
“There are tons of hedge funds of funds out there, but it's really only the top quarter or even the top decile of managers that are going to be interesting to buyers from a strategic perspective,” agreed Ted Gooden, principal at boutique investment bank Berkshire Capital Securities LLP, New York.
But the upper tier of hedge funds of funds with loyal and growing institutional client lists is not taking the bait, at least so far.
Rock Creek has been the most frequent subject of industry rumor mills.
“All the big strategic buyers have looked closely at Rock Creek, but no one has struck a deal yet,” said one source, who asked not to be identified.
Industry chatter persistently places Ravi Singh, managing director and head of alternative investments at New York-based Credit Suisse Asset Management, as the buyer most interested in Rock Creek. Mr. Singh didn't return a call seeking information and Suzanne Fleming, a CSAM spokeswoman, declined to comment on “market rumors.”