Does LFG deal mark a new consolidation phase in the absolute return UCITS industry?

Tue Apr 26, 2011

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The so-called Newcits industry already appears to be entering a consolidation phase

The move by the investment banking arm at UBS to buy out Luxembourg Financial Group for more than $36 million seems to show that the newly-arrived so-called Newcits industry already appears to be entering a consolidation phase.

The acquisition means that UBS is able to grow quicker in an industry which is predicted to grow to assets of $1.5 trillion in 2020, and compete on a more even footing with the other investment bank platforms like Bank of America Merrill Lynch and Deutsche Bank.

The LFG platform has a number of absolute return UCITS funds on its platform such as New York-based CastleRock Asset Management, London-based asset managers Sabre Fund Management, RAB Capital and others.

The LFG team is one of the most experienced teams in the UCITS industry. The management team of LFG’s UCITS platform includes former senior Deutsche Bank executives such as Gareth James, Johan Groothaert and Wim Scherpereel.

Collectively they established the first investment bank UCITS platform in 2001 and have set up more than 200 UCITS funds, according to literature from LFG. They also established and built Deutsche Bank’s hedge fund managed account platform.

UBS is not only buying an established UCITS platform (and structured products business) but also expertise. Will senior management stay once the once the acquisition has been completed?

A UBS spokeswoman says that the LFG group and employees will form part of the UBS global equities division. But she will not elaborate further yet, saying: "We cannot comment on future integration plans."

My feeling is that the management team at LFG appears to have a strong entrepreneurial spirit, so are eventually likely to leave once their contractual obligations to UBS have been fulfilled.

The deal, is subject to regulatory approval, is expected to be completed in the second quarter of 2011. LFG’s external shareholders include Deutsche Bank, Warburg and Feedback AG.

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ISSN: 2151-1845 / CDC10004H

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