05/16/2012

FRM, Prisma Seen as Acquisition Targets

There’s talk this week that two more fund-of-funds operations — Financial Risk Management and Prisma Capital — are in play.

London-based FRM, which has $9 billion under management, is being pursued by a publicly traded company, a source said. Man Group would seem to be a likely suitor, as the London firm’s multi-manager business is led by former FRM executive Luke Ellis. But a source familiar with Man said the firm would be more likely to target a U.S. fund-of-funds operation.

The $7.3 billion Prisma, a New York subsidiary of Dutch insurer Aegon, is in talks with private equity giant Kohlberg Kravis Roberts, another source said.

All of the presumed suitors and targets declined to comment.

Fund-of-funds managers have felt increasing pressure to consolidate since the financial crisis, when liquidity-strapped investors withdrew from multi-manager vehicles en masse. The Bernard Madoff fraud, which engulfed many funds of funds, further added to managers’ woes.

More recently, fund-of-funds operators have been hurt by a trend among pensions and other large institutions to seek hedge fund exposure through single-manager vehicles, rather than multi-manager funds. Indeed, some of the industry’s most prominent firms, including K2 Advisors and Pacific Alternative Asset Management, are shifting the focus of their businesses to customized multi-manager products in a bid to retain clients.

Others have had little choice but to join forces with larger firms. In just the past few months, Cantor Fitzgerald struck a deal to buy Cadogan Management, Lyster Watson agreed to sell its fund-of-funds business to Crestline Investors, and Nexar Capital agreed to be bought by Union Bancaire Privee. In addition, Coast Asset Management has reached a deal to sell its fund-of-funds business to an undisclosed asset manager.

Prisma was founded in 2003 by former Goldman Sachs executives Gavyn Davies, Thomas Healey and Girish Reddy. FRM is led by Blaine Thompson, who founded the business in 2001.

Back Print