In its fourth hedge fund acquisition,
EFG International is to buy Marble Bar Asset Management, a UK-based
alternative asset manager with some $4.4 billion of client assets
under management (AuM). With the addition of Marble Bar, EFG’s
total client assets relating to hedge funds will be in the region
of CHF15 billion ($13.3 billion) or around 18 percent of total
revenue-generating clients’ AuM.

The latest transaction involves an initial consideration of $517
million in cash, with expected future payments in the region of
$300 million to $800 million, subject to performance over six
years. EFG International’s sister company, Eurobank EFG, is
participating via a minority stake of 9.99 percent.

There is also conditional provision for long-term equity incentives
for key partners, involving an equity stake of up to 20 percent.
The terms of the transaction are in keeping with EFG
International’s publicly stated acquisition criteria, in this case
a price-earnings ratio of less than ten, the bank added.

Marble Bar specialises in long/short equity strategies, serving
institutional clients as well as ultra high net worth individuals.
It will bring EFG a number of such individuals, as about 30 percent
of its AuM relate to high net worth individuals and family
offices.

According to analysts, Marble Bar’s fund performance appears good,
with funds up 9 to 16 percent in the year to date and showing a 13
to 19 percent internal rate of return since their inception.

Keefe, Bruyette & Woods analyst Matthew Clark believes the deal
should be around 10 percent accretive to EFG earnings, though he
makes some offsetting adjustments. These reflect the initial
earnings drag from the recently announced EFG Financial Products
venture and less buoyant client inflows following EFG’s weak
third-quarter performance.

Established in 2002, Marble Bar has two founding partners – CIO
Hilton Nathanson and CEO Gilad Hayeem – who are part of a
seven-person senior management team that has an investment record
dating to 1998. Its approach is described as distinctive, combining
sophisticated analysis using a proprietary stock screening tool
with a discretionary trading overlay based on the experience of
Marble Bar’s senior fund managers and its analysis team. Its
investment strategy is to achieve relatively low volatility and low
correlation to equity markets through low-leverage funds, a high
level of diversification and with a targeted performance in the
range 12 to 15 percent a year, net of fees.

There is a growing appetite among clients of EFG International for
value-added internally generated solutions in fast-moving and
complex areas such as structured products, hedge funds and
derivatives, the bank said. But the majority of investment
solutions at EFG will continue to be sourced externally, and there
will be no compulsion to favour internal solutions, it added.

A number of its recent acquisitions of alternative asset firms –
PRS Group, Quesada and Bull Wealth Management – have all
established themselves in successful high-end niches, EFG noted.
Rudy van den Steen, head of M&A at EFG, said: ‘This transaction
is a good example of our acquisition philosophy, combining a
compelling strategic rationale, pricing discipline and a commitment
to shareholder value creation.”

The EFG deal comes as new industry data showed that hedge fund
assets under administration reached $2.56 trillion by the end of
the third quarter. According to hedgefund.net, an industry tracker,
Citco Fund Services continues to be the industry leader, reporting
$436 billion in single manager hedge fund assets, followed by HSBC
Securities Services with $229 billion and Citi’s Hedge Fund
Services with $228.8 billion. Citco reported quarter-on-quarter
growth of 5.1 percent.

SEB buys London hedge fund manager

Skandinaviska Enskilda Banken (SEB) has agreed to acquire Key Asset
Management (KAM), a London-based manager of funds of hedge funds.
The deal is an important step in SEB’s strategy to continue to grow
in the alternative investments segment, the bank said.

The acquisition of KAM’s $3.2 billion of AuM will take SEB’s own
hedge funds assets to about $6.5 billion. SEB did not officially
disclose a price for the deal, but Stockholm analysts believe it
paid less than 5 percent for KAM’s AuM.

KAM’s senior management and executives will continue in their
existing roles.