In what should not surprise longtime readers of The Deal, J.P.Morgan Chase & Co. (NYSE:JPM) agreed to acquire the rest of hedge fund manager Highbridge Capital Management LLC as of July 1.
As part of the deal, Highbridge co-founder Henry Swieca will leave the firm. J.P. Morgan acquired a 55% stake in the hedge fund
in 2004 and gradually increased its stake in Highbridge to 77.5% by the end of 2008. In 2004, the hedge fund had $7 billion under management, but since the original J.P. Morgan investment, the figure has grown to $21 billion, becoming the second largest hedge fund manager in the U.S., according to Absolute Returns magazine, notes the blog
Hedgefinger.
J.P. Morgan's gradual acquisition of Highbridge Capital could be one of several. The hedge fund industry has had a rough road since the economic crisis began, with several hedge fund managers closing up shop along the way. Back in March, The Deal contributors
Ilan S. Nissan, Douglas C. Freeman and Solomon Wifa of O'Melveny & Myers LLP
predicted that many hedge funds such as Highbridge may want to combine with private fund managers or fold into larger institutions going forward.
The resulting shakeout in the hedge fund
industry has seen a number of hedge funds fail, while others have tried
to retrench and refocus, including by selling assets at deepening
discounts. Some hedge fund advisers have begun to explore combining
with other fund advisers to diversify their businesses and to
opportunistically align with well-respected fund advisers or managers.
We
expect this trend will continue and that well-positioned hedge fund
advisers and other private fund managers, including private equity
firms, will increasingly seek to strategically acquire or combine with
other private fund managers in the coming months.
As they indicated, the trend has begun with Cheyne Capital Management acquiring Altedge
Capital and GLG Partners Inc.'s acquisition of Société Générale Asset Management
UK. Plus, many more hedge funds are either seeking to be acquired or looking for acquisitions such as Man Group plc and RAB Capital plc, which are both are seeking smaller hedge funds to acquire, according to Reuters. - Maria Woehr
Continue reading below
