By Niki Natarajan
As Royal Wedding fever hit the UK, comparisons were being
made between past and present performance - Kate Middleton vs
Lady Diana Spencer - bets were being made on the global macro
environment - would it rain on 29 April? - and, like good
manager selection, Kate's suitability for the Royal portfolio
was assessed. At stake was not just the happiness of two
individuals but also the sustainability and long-term future of
It seems that the ingredients that will make this Royal
Wedding a success in future have a lot in common with the
success or failure of M&A deals in the hedge fund space.
The divorce rate in funds of funds is not as high as in the
Royal family, though some - like Cadogan Management and
International Asset Management - have been returning to
singledom with what seems like glee.
But what is far more alarming is the mortality rate, which
one can only assume is an unintended consequence of a merger.
As Frédéric Neefs returns to the front line at
Standard Life to try to turn Aida Capital into the success that
the Green Way funds once were (see
story), one needs to ask: "What happened to the
award-winning excellence that were once Crédit
Agricole's funds of funds?"
The once $26 billion business that was eighth in the
December 2007 InvestHedge Billion Dollar FoHF ranking is now
17th, having merged its $9.3 billion funds of funds business
with the $1.6 billion managed account platform. Amundi
explained the post-crisis strategy allows it to focus on the
increased importance of transparency, liquidity and control to
investors - but is it a reactionary or evolutionary move?
The story is the same at Man, where RMF and Glenwood are now
subsumed into what looks like a new managed account-based FoHF
incarnation. The trigger was clearly 2008 and, in the case of
RMF, a dash of Madoff, but behind Luke Ellis' recent return to
the coal face is the unflinching belief in his end goal: to
create the next generation of multi-manager investing.
The evolution of the funds of funds industry was discussed
at length at our
Global FoHF Forum in New York. It seems that in this
post-crisis world there are two paths to the future: solving a
problem or going for a goal. Both are likely to have unintended
consequences, but which model has collateral benefits and which
one is dogged with collateral damage?
In neuro linguistic programming, there is a concept called a
well formed outcome. Key is setting the framework for change in
positive terms and knowing what one wants an event to achieve.
Irrespective of the quote in the press release, is the merger
really about growing a business with similar values, beliefs
and visions for the future, or is it just the sellers wanting
to get out?
Having a positive, achievable goal with a purpose is only
half the battle. Are the skills and support there and is vision
shared by those needed to make it work? Most importantly, are
the potential collateral costs and consequences acceptable?
Clearly the FoHF marriages that seem to be a success are
Permal's to Legg Mason, Aurora's to Natixis, and for its
duration - at least in performance terms - Coutts' business
when it was with RBS. Now under Aberdeen, the ingredients for
Orbita's happy marriage are there but, like with Will and Kate,
only time will tell.
Ecology is the NLP term used to describe whether an outcome
has acceptable costs and consequences. Sustainability is at the
heart of building a long-term future, but does everyone
involved want this? It turns out that performance is not the
main reason many institutional investors buy hedge funds,
making many of the assumptions that underlie M&A deals
So what are the basic ingredients of sustainability? Under
the title, "Building a Sustainable Future", speakers at the
InvestHedge Forum on 13-14 September will discuss
sustainability of business models, infrastructure, incentive
schemes, investments, performance leadership, succession and