2011 Berkshire Investment Management Review

8/6/2019 2011 Berkshire Investment Management Review

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2011 | Investment Management Industry Review


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Berkshire Capital is a leading investment bank focused on M&A in the

asset management and securities industries. With more completed

transactions in this space than any other investment bank, we helpclients ind successful, long lasting partnerships.

Founded in 1983, Berkshire Capital is an employee-controlled

investment bank headquartered in New York with ofices in Denver

and London. We are recognized as a leading expert in the wealth

management, money management, alternatives, real estate and broker/

dealer industries. We believe our success as a irm is determined by

the success of our clients and the durability of the partnership we help

them to structure.

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New York, NY 10022

212-207-1000

999 Eighteenth Street, Suite 3000

Denver, CO 80202

303-893-2899

Cayzer House

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+44 (0)20 7828-2828

Berkshire Capital Securities Ltd. is authorized and regulated by the FSA

www.berkcap.com


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2 | INVESTMENT MANAGEMENT INDUSTRY REVIEW ~ 2011

after the government wound down a 2-year-old TroubledAsset Relief Program (TARP) that is expected to ultimatelycost taxpayers anywhere from $50 billion to $100 billion far less than originally feared. In December, the U.S.Treasury also sold the remainder of its stake in the now-proitable Citigroup, a bailout that ended up generating a$12 billion proit for Uncle Sam.

Going forward, however, analysts raise questions aboutthe impact on bank proitability of new regulations, withStandard & Poors suggesting in a very early and broadreview that the eight largest banks in the U.S. could takea collective annual hit to proits in the area of $20 billion,based on a loss of proprietary trading income, reducedderivatives trading income, and lower debit card fees.S&P did acknowledge that its indings were subject tosigniicant uncertainties based upon the inal rules andimplementation while also expressing conidence thatbanks could generate greater proits in other areas tooffset the losses.

Within the asset management industry, buyers evidencedboth increased conidence and opportunism in 2010, asstock markets, though erratic, provided positive returns;assets and proits rose; and regulatory changes and theaccumulated pressures of several years of depressedmarkets drove sales. Banks continued to reorganizeoperations in response to inancial challenges andregulations, selling several asset managers, includingalternatives businesses. The challenges of economics andscale or succession issues continued to motivate boutiquesto sell, though many held on to equity in line with recenttrends and best practices.

In total, there were 143 deals valued at more than$21 billion in aggregate, including three billion-dollar-plus transactions, with two of the buyers being Canadianbanks. Unlike their larger brethren across the borderand in Europe, Canadas banks avoided the subprimedebacle, and emerged with solid balance sheets and aneye on expansion. The largest deal involving a Canadianbank and the largest in 2010 was a strictly domesticaffair that saw Scotiabankpay $2.3 billion for the 82% ofmutual fund manager DundeeWealth it did not own. Theaddition made Scotiabank the ifth-largest mutual fundmanager in the country and furthered the consolidation

at $209 billion, nearly double the year-earlier level also set a new annual record. In an interview withBloomberg, one Deutsche Bankixed income managerprovided a succinct view: Junk bonds have beneitedgreatly by the fact that theyre the only place in the ixedincome world you can get some nice return.

Emerging markets, which have registered solid economicgrowth in the face of the developed worlds woes, alsodrew investors, with EPFR Global data showing recordbond fund net inlows in the irst nine months of$39 billion and equity fund lows at a record $84 billionthrough the irst three weeks of November. GoldmanSachs in a recent study estimates that institutionalinvestors in developed markets could purchase$4 trillion in emerging market equities through 2030,with those nations potentially raising their share of globalmarket capitalization to 55% from the current 31%.

Not coincidentally, selected emerging markets in Asia andLatin America offered some of the best equity returnslast year. As corporate proits surged, U.S. markets

also generated positive numbers, the low of money anduncertainty among investors notwithstanding. As of thethird quarter, Thomson Reuters estimated that full-year2010 proits at Standard & Poors 500 companies wouldrise a collective 36% while projecting 14% growth in2011. The Wall Street Journal reported in December thatnoninancial companies were sitting on $1.93 trillion incash and other liquid assets, with cash accounting for 7.4%of total assets, a ratio last seen in 1959.

The stabilization of the U.S. banking industry was anotherpositive development in 2010, with inancial irms in theS&P 500 expected to record 144% growth in proits for thefull year and another 25% in 2011, according to Thomson

Reuters. Between the third quarters of 2009 and 2010,commercial and savings banks in the U.S. insured by theFederal Deposit Insurance Corporation (FDIC) saw proitsclimb sevenfold to $14.5 billion, driven in large part bya reduction in provisions for loan losses that accrued tothe bottom line. The third quarter results marked theifth consecutive quarter the industry recorded gains inproitability.

The improved picture led the Federal Reserve in Novemberto give the green light to banks to boost dividends again,albeit within the context of new and more restrictivecapital requirements. That edict occurred just a month

Taking a Chance on Debt

2009 2010

Global High-Yield Debt Offerings $177bn $318bn (+80%)

Average Spread 608 bps 148 bps

Source: Thomson Reuters

IN TOTAL, THERE WERE 143 DEALS VALUED AT

MORE THAN $21 BILLION, INCLUDING THREE

BILLION-DOLLAR-PLUS TRANSACTIONS


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BERKSHIRE CAPITAL SECURITIES LLC | 3

next two years.

Bailout recipientCommerzbankcontinued to divest itswealth business outside Germany, adding one more sale(ofDresdner Bank Monaco) to the six it executed in 2009Although it did draw such notable buyers as BNY Mellon,Focus Financial Partners and Northern Trust, the wealthsector was otherwise quiet for a second consecutive year.

Meanwhile, McKinsey & Co.s latest annual survey ofEuropean private banking showed the continuing pressurethe sector faces, with proitability declining again in 2009to 20 basis points of AUM about half the level of 2005 even as AUM increased by 10%.

As the credit markets began to gain some footing, severallarge alternative asset managers took the opportunityto expand their capabilities via acquisitions. Blackstone

Group followed up on its major 2008 purchase ofcredit asset manager GSO Capital Partners to buy thecollateral management agreements for collateralized debtobligations (CDOs) and collateralized loan obligations(CLOs) managed by Callidus Capital Management.Fortress Investment Group acquired two businesseswith a total of $13 billion in CDO assets. Carlyle Group,a particularly aggressive dealmaker last year in arange of industries, bought the collateral managementcontracts for 11 CLO funds managed by Stanield CapitalPartners. Carlyle which is reviewing a public offering, alsoacquired a 55% stake in a long-short credit hedge fund,

trend in the nations asset management industry.Scotiabank also cut two deals for wealth managers,including BNP Paribas Panamanian-based business.

In the second mega-deal, Royal Bank of Canada extendedits footprint with the $1.5 billion acquisition of LondonsBlueBay Asset Management, which manages $40 billionin a mix of traditional and alternative assets in Europe andemerging markets. Two other Canadian irms,Foresters and Sprott Inc., made acquisitions inthe U.S., while Toronto-based mutual fund giantCIFinancial scooped up the Canadian fund businessofHartford Financial Services Group. In a dealbetween two Toronto irms,AGF Managementpaid $320 million (with about one-thirdsubject to deferral over three years) forAcuityInvestment Management(AUM: $7 billion), oneof Canadas few remaining independent mid-sizefund managers.

Elsewhere, banks damaged by the inancialcrisis remained sellers, including Royal Bank

of Scotland and Bank of Ireland, whichsold asset managers toAberdeen AssetManagementand State Street Global Advisors,respectively. Several major banks shopped theiralternatives businesses last year, to comply withregulatory changes and/or as part of strategicreorganizations. A number of these deals involvedmanagement buyouts, including the irst ofive private equity unit divestitures planned byHSBC. Bank of America, Citigroup and MorganStanley also sold alternative asset managers,while Bank of America sold more than $8 billionin BlackRock shares a stake it inherited withthe 2009 acquisition ofMerrill Lynch & Co.Deutsche Bankdivested its large New York-based quantitative manager, QS Investors, but didmake two investments, including the purchaseof a 49% stake in New Zealand broker and asset managerCraigs Investment Partners. SunTrust Banks andUnicreditwere among other banks reviewing the sale ofasset management units.

One of the higher-proile distress deals involved M&TBank Corp.s acquisition ofWilmington Trust. AlthoughBuffalo-based M&T took on a balance sheet laden withbad construction loans, it paid a knockdown price of

$351 million in stock and gained the Delaware banksprestigious wealth and asset management businesses(AUM: $58 billion). Bank of Montreal added to its Midwestbanking and wealth operations with the $4.1 billionacquisition of Wisconsin-based Marshall & Isley, alsotroubled by loan losses. M&I has $33 billion in AUM andanother $129 billion in assets under administration (AUA)in a wealth business that accounts for 12% of revenue.Bank of Montreal, with some $260 billion in AUM and AUAin its private client business, owns Chicagos Harris Bank,which also has a signiicant wealth unit. Analysts expectnumerous takeovers of struggling regional banks over the

Back from the Lows

Major Stock Indices 2010 v. 2009 Close Recent Low(%) 12/31/10 (Mo./Yr.)

Dow Jones Ind. Avg. 11.0% 11,578 6,547 (3/09)

S&P 500 12.8 1,258 677 (3/09)

Nasdaq 16.9 2,653 1,269 (3/09)

FTSE 100 (U.K.) 9.0 5,900 3,512 (3/09)

DAX (Germany) 16.1 6,914 3,665 (3/09)

Nikkei 225 (3.0) 10,229 7,055 (3/09)

China (Shanghai A) (14.3) 2,808 1,707 (11/08)

Dow Jones U.S. Industry Index % gain 2010 v. 2009

Financials 12.0%

Asset Managers 8.1

Banks 10.6

Life Insurance 23.0

Investment Services 1.6


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The world economy and the markets made it through onemore year of crisis with a collective balance sheet thatappears precariously balanced between recovery andchaos, in part because the long-term cost of maintainingthat uneasy equilibrium continues to mushroom. In the

U.S., the deal cemented in December between PresidentBarack Obama and Congress to extend Bush-era tax cutsand unemployment insurance could mean a 2011 deicitexceeding the $1.3 trillion level reached in 2010. Thedeicit forecast for 2012 also remains above the$1 trillion level.

Claren Road (AUM: $4.5 billion). Institutional investorsappeared to show an increasing interest in credit hedgefund strategies last year as part of an effort to diversifyalternative assets away from equities.

The hedge fund industry accounted for the third mega-deal of 2010, as Man Group paid $1.6 billionfor GLG Partners. In an increasingly stratiiedhedge fund universe, the deal created a top-twoindustry leader with more than $50 billion indedicated hedge fund AUM. The transaction alsoteams two publicly-traded and complementaryirms that have seen their performances drop offconsiderably since start of the inancial crisis. Ina busy year for dealmakers, the alternative sectordrew such cross border buyers as Credit SuisseGroup, Gottex Fund Management, JPMorganChase, Natixis, Sciens Capital ManagementandTPG-Axon. In the largest of three deals it madelast year,Afiliated Managers Group paid $775million for 85% of London private equity fund of

funds manager Pantheon Ventures, a top-threefund of funds manager in that industry.

In what is likely a harbinger of deals to comefeaturing buyers from emerging markets, IndiasReligare Enterprises invested in two U.S.-basedalternative asset managers, paying $200 millionfor a majority of San Franciscos NorthgateCapital, a private equity fund of funds irm with$3 billion in AUM, and $172 million for 55% ofConnecticuts Landmark Partners, aprivate equity and real estate fund offunds manager with more than $8 billionin committed capital. Religare plans tocreate a separately traded U.S.-basedglobal asset management businessbuilt mainly around boutiques. Withinemerging markets, Brazilian investmentbank and wealth manager BTGPactual received a $1.8 billion capitalinfusion from a consortium of threepowerful emerging markets sovereignwealth funds:Abu Dhabi InvestmentCouncil, China Investment Corp., andGovernment of Singapore InvestmentCorp.

The real estate advisory sector drewa number of opportunistic investorslast year, including Rockefeller GroupInternational, which entered Europevia an investment in real estate fundmanager Europa Capital. Guardian Life Insurance took aminority stake in Lowe Enterprises real estate advisoryunit, calling it an opportune time to invest in real estate.In Europe, management in two advisory irms boughtout the non-core interests of two large inancial irms,Merrill Lynch and KBC Asset Management.

vvv

Emerging Markets Surge

Mergers & Acquisitions, All Industries

Value of Announced Deals ($ billions) 2010 2010 v. 2009

(%)

Worldwide $2,434 +23%

U.S $882 +14

Europe $641 +10

Asia-Paciic $482

Emerging Markets $806 +76

2010 M&A (misc)

Finance sector % of target value = 15%

Source: Thomson Reuters

Investment Management Transactions

2006 2007 2008 2009 2010

Majority Equity 150 166 149 115 115

Minority Equity 12 26 29 5 15

Management Buyout 5 12 21 15 13

Total 167 204 199 135 143

Total Transaction Value ($B) $47.2 $37.4 $16.3 $31.7 $21.2

Total AUM Changing Hands ($B) $2,340 $1,155 $1,148 $3,300 $1,134

Source: Berkshire Capital Securities LLC


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Europe remained in its own controlled but perpetualstate of crisis, with the bailout of Greece beginning in May,Ireland following six months later, and oficials keeping anervous eye on Portugal and the irst nation of signiicantsize, Spain. For Greece, the eurozone and InternationalMonetary Fund ponied up a rescuepackage of $150 billion, adding a just-in-case total of several hundred billion more

for the entire area to calm the waters.Ireland received promises of $110billion. Meanwhile, the Germans austereresponse to salvaging its proligate euro-cousins had some observers mumblingabout the sustainability and wisdomof the currency union as currentlyconstituted.

Many analysts are concerned that thebailout packages may ultimately proveinsuficient, in part because the demandamong skeptical private investors for

higher bond rates in those markets.The added austerity required to payinvestors will further compromisetheir economies. Indeed, Pimcos headof European portfolio management,Andrew Bosomworth, suggested duringan interview with German newspaper DieWelt in December that Greece, Irelandand Portugal will need to leave theeurozone temporarily to restructure theirdebts. Although a Barclays Capital globalsurvey of 2,000 institutional investorsshowed conidence in the ability of the

euro area to avoid a full-ledged crisis,one in three still expects a eurozonecountry to either default or restructuredebt in 2011 and another 60% expectadditional European bailouts. TheFinancial Times wondered aloud whetherthe European Unions failure from thestart to address monetary union withiscal union undermines Europes pledgeto do whatever is required to combatthe eurozone crisis.

Under ordinary circumstances, the crisis-

related debt might be managed over timethrough a mix of restrained austerity andaccelerated economic growth. But with tens of millions ofbaby boomers preparing for retirement in those nationsand expecting their just reward from the state, thesesame governments already face costs that appeareduntenable prior to the inancial crisis. In the U.S., thenational iscal nightmare is complicated by the apparentlyunsustainable health care and pension promises made topublic employees on the state and local levels. Estimates ofunfunded retirement liabilities range as high as $3 trillionfor states and $600 billion for the largest U.S. cities.

Whos Selling

N T S % T

V T S % T


Real Estate

Wealth Management

48%

35%

4%13%

2009

38%

27%

22%

13%

2010

79%

16%

1%4%

24%

47%

24%

5%

2009 2010

Money Management

Private Equity / Other

As was the case with the dot-com and real estate bubbles and among bailout recipients such as General Motorsthat began to resemble unsustainable social serviceagencies as much as they did industrial corporations atsome point inancial reality sinks in. When it does, federal,

state and local governments will have to make toughdecisions on taxes and spending that will likely depressconsumers and businesses alike. The reaction from anAmerican citizenry that tends to appreciate entitlementsand services but rejects the taxes required to pay for themmay also turn ugly, with all that portends in the politicalarena.

In November, a White House panel kicked off thereality check by recommending $3.8 trillion in federal


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showed that 25% of European institutional respondentsplan to directly manage a larger share of their own assets.

The changes in the marketplace, including a decidedpreference among retail investors for more conservativeand passive equity investments, were relected in many ofthe money management deals last year, as buyers showeda marked interest in adding ixed income capabilities. Butasset managers who counted credit-related instrumentsin their product portfolios also took the opportunityto bolster those capabilities via acquisitions. Broadly,dealmakers in the money management sector werereasonably active last year, recording 54 transactionsvalued at $5.1 billion. Buyers included such alternativeinvestment heavyweights as Blackstone Group, CarlyleGroup, Fortress Investment Group and GuggenheimPartners, along with traditional asset managers likeCharles Schwab and Federated Investors.

The acquisition by Fortress Investment Group of ixedincome institutional manager Logan Circle Partnerswas a clear sign of changing times, as alternative asset

managers extend their businesses into traditional arenas.Private equity irms in particular are grappling with amore challenging fund-raising environment, as institutionsexpress greater skepticism about the value of many ofthese investments. Logan Circle added $12 billion in ixedincome investments to the $30 billion Fortress has inprivate equity and hedge funds. Fortress paid $21 millionin cash and could make additional performance-basedpayments this year.

A three-year-old joint venture between employeesand Guggenheim Partners, Logan was formed viaGuggenheims lift-out from Delaware Investments of ateam of ixed income managers, traders and marketers,along with $13 billion in AUM. In referencing the dealin its latest annual report, Fortress said expanding itsinvestment offerings and adding scalable platformsoutside the alternative space will bring a new group

Money Management

As institutional investors endured the fourthcalendar year since the start of the inancial crisis

in the summer of 2007, and cringing headlinesreported the yawning gaps in public employeepension funds, there were clear signs of restiveness.Although public pension plans reported strongreturns for the 2009 year, the continued actuarial

pressure on the plans not to mention thepublic purse led some to squeeze their moneymanagers on fees, which generally account for thesingle greatest expense. The largest such plan, theCalifornia Public Employees Retirement System(Calpers), reported it had saved $100 million in

the iscal year ending June 2010 as a result ofrenegotiated fees.

Meanwhile, the states second massive pension fund,the California State Teachers Retirement System(Calstrs), is attempting to save by managing more of itsmoney in-house, a strategy many other public funds areexploring as well. Numerous institutions are also shiftingtheir equity allocations toward less expensive passiveinvestment products. The EmployeesRetirement System of Rhode Island,with more than $7 billion in assets,

may be the most extreme example,having parked virtually its entire$4 billion global equity portfolio inindex funds, according to its April2010 report. U.S. institutions are alsodabbling in exchange traded funds,with Greenwich Associates estimatingthat 14% of institutions are currentlyusing these instruments, primarily fortactical reasons related to portfoliomanagement.

The trend away from more proitableactive equity investing isnt conined

to the U.S. In the most recent FTfmsurvey of U.K. pension funds, the twoleading managers ranked by AUM werepassive investment irms, Legal & General InvestmentManagementand BlackRock, with AUM up by strongdouble-digits at both irms in 2009. We used to ask isthere going to be a point where people start movingmoney back into active, researcher Stephen Birch told theFinancial Times. But it doesnt look likely. A survey byFeri Euro Rating Services indicated that among Germaninstitutions, European equity mandates made up half ofthe stated mandate cancellations. The Feri survey also

Money Management Transactions

2006 2007 2008 2009 2010

Number of Transactions 49 62 77 65 54

Combined Value ($B) $34.7 $15.1 $8.7 $25.1 $5.1

Total Seller AUM ($B) $1,920 $718 $683 $3,011 $357

Average Deal Size ($M) $708 $244 $113 $386 $95

Average Seller AUM ($B) $39.2 $11.6 $8.9 $46.3 $6.6



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amid a generally risk-averse marketplace, investors didbegin wagering money again in the quest for yield. Globaljunk bond issuance doubled in the irst three quartersof 2010 versus 2009, to reach an annual record of $209billion. The spread between junk and investment gradebonds also narrowed substantially from the height of theinancial crisis, while prices on U.S. junk bonds topped 100on average last September an indicator of demand as

well as conidence about repayment. And, indeed, MoodysInvestors Service reported that the junk bond default ratewas expected to dip below 3% by the end of 2010, nearly

12 points below the level reachedin the fourth quarter of 2009.

The leveraged loan market alsorebounded from a 2008 low, withprices recovering in tandem, whilethe associated collateralized loanobligation (CLOs) market beganshowing signs of life. Meanwhile, inthe U.K., government-owned Royal

Bank of Scotland embarked on aroad show last September to hawkthe sale of more than $7 billion inmortgage-backed securities thelargest such offering since theinancial meltdown. At the sametime, South African-based bankInvestec brought to European

investors nearly $400 million in mortgage-backedsecurities that included subprime loans, the irst suchsecurity in Europe since the credit crisis began.

Fortress Investment cut three credit-related assetmanagement deals in addition to its purchase of LoganPartners, including the purchase ofCW Financial Servicesone of the largest special servicers for commercial andmultifamily real estate debt, with a portfolio that includesmore than $12 billion in AUM. Fortress said its globalcapabilities in real estate, credit and structured inancecombined with CWs diverse capabilities result in aunique capacity to participate in, and beneit from, thereal estate markets recovery and reconstitution. Boston-based CW was majority-owned by Otera Capital, a unitof Canadian pension fund manager Caisse de depot etplacement du Quebec.

Blackstone Group, which two years ago acquired a major

credit asset manager, GSO Capital Partners, purchasedthe collateral management agreements for CDO andCLO funds managed by Callidus Capital Management,a unit ofAllied Capital Corp. (itself acquired last yearby inance companyAres Capital). The Callidus funds,amounting to $3.2 billion in AUM and primarily consistingof leveraged loans and high-yield bonds, will be managedwithin the GSO Capital unit and enhanced Blackstonesposition as one the largest managers of credit-relatedassets. GSO had $24 billion in AUM prior to the deal. Thistransaction represents the execution of one of our keystrategic initiatives to further scale our CLO franchise and

of investors to Fortress while diversifying earnings.Logan will retain its name and continue to operate inPhiladelphia. In a separate diversiication move, Fortressacquired 80% ofAmerican International Groups interestinAmerican General Finance, which provides loans, retailinancing and other credit products to consumers. Fortressmade three other acquisitions that added a total of$22 billion in credit-related assets (see next column).

In a transaction between two Midwest irms, Kansas City-based UMB Financial Corp. acquired nearly $10 billion inixed income AUM through thepurchase of substantially allof Indiana-based Reams AssetManagement Co., an institutionalirm established in 1981. Thedeal was done through UMBsasset management arm, ScoutInvestment Advisors, which hasan equity focus. In explainingthe deal, UMB president and

chief operating oficer PeterdeSilva described ixed incomeinvestments as a key strategicgrowth area in the institutionalasset management businesswhile Reams alluded to recentglobal economic conditionsdriving institutions to seekservice providers that have a strong parent like UMB.In the ive years through 2009, AUM at UMB rose 68% to$12.4 billion. As part of an effort to expand its mutual fundand institutional businesses, in 2009 UMB created ScoutDistributors to market Scout funds.

Congress Asset Managementof Boston enhanced its ixedincome offerings through the acquisition of a neighboringasset manager, Prelude Asset Management. Preludeadds $1.2 billion in ixed income institutional AUM to the$5.2 billion in equity and ixed income assets Congressalready managed. Congress, an institutional and wealthmanagement irm founded in 1985, said the merger isintended to provide an expanded ixed income team withadditional portfolio management and research depth.Federated Investors added to its massive money marketofferings through the acquisition of $17 billion in such

instruments from the RidgeWorth Capital Investments

unit ofSunTrust Banks. The assets were wrapped intoexisting Federated money market funds with similarinvestment objectives. In 2008, Federated picked up morethan $12 billion in distressed money market assets fromPutnam Investments. Federated, whose money market-driven business beneitted from massive inlows duringthe inancial crisis, saw a reversal of that trend betweenthe second quarters of 2009 and 2010, with money marketAUM declining $86 billion and overall AUM off $65 billion.

Two years after the collapse of Lehman Brothers and theinancial meltdown, several asset managers sifted throughthe ruins to enhance their credit-related offerings. Indeed,

UMB FINANCIAL CORP. ACQUIRED

NEARLY $10 BILLION IN FIXED

INCOME AUM THROUGH THE

PURCHASE OF SUBSTANTIALLY

ALL OF INDIANA-BASED REAMS

ASSET MANAGEMENT CO.


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Boston and founded in 1994, Windward has generated56% compound annual growth in AUM over the lastive years, with assets managed in conservative, growthand aggressive-growth portfolios of ETFs. Woodwardstraditional client list of high net worth individuals andinstitutions will be expanded to incorporate Schwabsretail customers.

Guggenheim Partners picked up more than $5 billionin ETF assets as well as retirement products andmutual funds via its purchase ofSecurity Beneit Corp.

Guggenheim, which will invest$400 million in Security Beneitas part of the deal, was joinedby investors who includedGuggenheim shareholders.Guggenheim managing partnerTodd Boehly said the transactionwill allow his company toaccelerate Security Beneitsgrowth given the marketplaces

increasing demand for robustretirement programs andinvestment strategies. Kansas-based Security Beneit gained theETFs and alternative productsvia its 2007 acquisition of RydexInvestments, which has a totalof $20 billion in AUM. In 2009,Guggenheim also added some $3billion in ETF assets through itsacquisition ofClaymore Group.

In a third transaction involving ETFs, Deutsche Bankacquired the target-date ETF business of New YorksXShares Advisors(see Cross Border for more information).In a deal involving a private equity irm, Flexpoint Fordbecame the third-largest shareholder in WisdomTree byacquiring the 7% ownership ofAmerican InternationalGroup. WisdomTree, a New York-based ETF sponsorand asset manager, saw its AUM jump 64% betweenthe third quarter of 2009 and 2010, to $8.9 billion. InOctober, the company also announced an agreement withMexicos Compass Group to distribute WisdomTree ETFsthroughout Latin America. Flexpoint, based in New Yorkand Chicago, targets the inancial services and healthcareindustries and has $1 billion under management.

In the more traditional funds arena, Nuveen Investmentsacquired the FAF Advisors mutual fund business for $80million in cash and the assumption by FAF parentU.S.Bancorp of a 9.5% shareholding in Nuveen. The FAFbusiness added $25 billion in AUM, primarily in the First

American Family funds business, to the $150 billionNuveen already managed. Nuveen, the largest managerof closed-end funds, said the deal merges its specialtyin municipal bonds with FAFs proven and distinctinvestment capabilities, including taxable ixed income,real assets, equities and asset allocation. Additionally,Nuveen said the transaction will further enhance its

capitalize on the strength of our investment process andinfrastructure, said Bennett Goodman, senior managingpartner of GSO.

Carlyle Group was the third major alternative assetmanager to scoop up credit-related assets last year,acquiring the collateral management contracts for 11 CLOfunds managed by Stanield Capital Partners, as wellas the investment management agreements for three ofStanields separate accounts. The deal adds $5.1 billionin credit-related AUM to the $13 billion Carlyle alreadymanaged. Calling scale critical tothe CLO business, Carlyle notedthat the addition of Stanieldsassets makes it one of the worldslargest structured credit managersand an industry consolidator.Stanield CEO Dan Baldwin calledits decision to sell a very dificultone but noted that investors in aconsolidating credit marketplace

are seeking irms that possess thebroad array of resources found atlarge global asset managers.

Commercial Industrial FinanceCorp. added scale to its portfolioof CLOs with the purchaseofCypressTree InvestmentManagement, which manages orsubadvises $2.8 billion in high-yield and leveraged loan assets.CIFC had $3.6 billion in CLO assets prior to the deal.CypressTree was acquired in 2009 by credit asset managerPrimus Guaranty, but in making the divestiture Primus

said CLO management is no longer a core business. Anadditional credit deal of note involved Deerield CapitalCorp.,s acquisition ofColumbus Nova Credit InvestmentManagement, which manages $1.8 billion in CLO assets.Deerield paid $25 million plus an additional $7.5 millionover ive years for Columbus, owned by New York assetmanager Renova U.S. Management.

Prior to the transaction, Chicago-based Deerieldmanaged $4 billion in CLO assets and $9 billion overall.As part of the deal, a Renova investment vehicle agreedto purchase $25 million worth of Deerields convertiblenotes, the proceeds from which will be used to help retire

$74 million in debt. In addition to enhancing its AUMand revenue growth, Deerield said the deal allows it tostrengthen its balance sheet and add a valuable partner inColumbus Nova. Nine months later in December, Deerieldannounced a merger with Commercial Industrial FinanceCorp. The combined irm will have $15.6 billion in AUM,primarily in CLOs, making it one of the worlds largeststructured credit and leveraged inance asset managers.

The exchanged traded funds arena generated severaldeals, the most signiicant involving Charles Schwabs$150 million stock-and-cash purchase ofWindwardInvestment Management(AUM: $4 billion). Based in

THE EXCHANGED TRADED FUNDS

ARENA GENERATED SEVERAL

DEALS, THE MOST SIGNIFICANT

INVOLVING CHARLES SCHWABS

$150 MILLION STOCK-AND-CASH

PURCHASE OF WINDWARD

INVESTMENT MANAGEMENT.


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manager that extends TIAAs capabilities in that arena.Based in Illinois and founded in 1986, Westchestermanages more than $400 million in assets for institutions.RS Investments of San Francisco acquired NorthCarolinas Oak Value Capital Management, with $195million in mutual fund assets. The companys lagshipOak Value fund was subsequently rebranded under theRS name. Oak Value, founded in 1986, said the deal will

allow it to focus exclusively on investment managementwhile beneitting from RS scale. RS is majority owned byGuardian Life Insurance. In a deal between two Chicagoirms with past ties, Dearborn Partners added small-capcapabilities with the acquisition ofThird River Capital. Ina transaction between two St. Louis irms, Stifel FinancialCorp. boughtMissouri Valley Partners, an institutionalmanager with $800 million in AUM that was owned byFirst Banks, Inc.

The consolidation trend in Canadas asset managementindustry continued apace, with Scotiabanks $2.3billion purchase of the 82% ofDundeeWealth (AUM:

$42 billion) it did not already own. The cash-and-sharesdeal the largest asset management transaction of2010 makes Scotiabank the ifth-largest mutual fundmanager in Canada and further depletes the domesticranks of independent asset managers. Dundee adds $31billion in its Dynamic line of funds to the $24 billionScotiabank already managed under its brand name,giving the combined business nearly an 8% share of thefunds market. Dundee, whose overall AUM jumped 27%in the year through September 2010, also adds third-party distribution capabilities. Rick Waugh, Scotiabankpresident and CEO, said the deal demonstrates our strongcommitment to build our wealth management presence

in Canada. Scotiabank, which also has a large minorityinterest in Canadian mutual fund giantCI Financial,made two other deals last year, acquiring Ontario-basedmultifamily ofice WaterStreet Group and the Panamanianwealth business ofBNP Paribas (see Wealth Management)

In a deal between two independent Canadian assetmanagers, Fiera Capital and Sceptre Investment Counselmerged to create a new publicly traded company with$30 billion in AUM (about three quarters from Fiera).The $71 million transaction involved a share swap thatleft Fiera Capital with 60% of the new company, FieraSceptre. SIC said the deal leverages the strengths of

both companies to create a signiicant player in theinvestment management sector. SIC, which had been apublic company for 24 years, ran a family of eight mutualfunds and had a largely institutional focus, along with ahigh net worth business. In recent years, the company hadbeen dogged by performance issues and redemptions, aswell as succession issues following the death of its CEOin 2009. Fiera, which was privately held, also targets theinstitutional marketplace. In a third all-Canada deal, IGMFinancial wealth unitInvestment Planning Counselacquired Partners in Planning, a inancial services irmthat operates a mutual fund business.

multi-boutique model consisting of seven branded assetmanagers, including NWQ Investment Managementand Winslow Capital. The deal also cements for Nuveena distribution relationship with the nations ifth-largestcommercial bank. U.S. Bancorp said it did not have thescale as an asset manager to build the FAF business andcited the beneits the alliance would offer to customers

in its wealth management business. In 2007, Nuveen wasacquired by Madison Dearborn Partners in the largestasset management deal to date by a private equity irm($6.3 billion, including assumption of debt).

Afiliated Managers Group tackled the market last year tocut three deals that expanded its international capabilities,including one U.S.-based target that specializes inemerging and global markets investments, Trilogy Global

Advisors (AUM: $12 billion). Based in Florida and NewYork and started up in 1999, Trilogy manages $12 billionin assets for institutions and retail customers in the U.S.,Europe and Asia-Paciic. AMG chairman and CEO SeanHealey said he continued to see substantial opportunitiesfor deals for traditional and alternative irms, increasingly

characterized by succession-driven transactions. Inkeeping with AMGs afiliate model, Trilogy managementwill retain a substantial portion of equity whilereinvesting a signiicant portion of the transactionproceeds into Trilogy products. (For additional AMG deals,see Cross Border and Alternatives.)

Evercore Partners paid $69 million (with a potentialearnout payment of $14.7 million) for a 49% stake in

Atalanta Sosnoff Capital, one of two asset managementdeals the New York investment bank concluded last year.Atalanta, also based in New York, manages $10 billion inassets for institutions and high net worth clients and has a

large-cap and balanced-investment orientation. Founded in1981, the irms AUM has grown ivefold since 2002. In aninterview last May with Pensions & Investments, Evercorepresident and CEO Ralph Schlosstein called Evercoresasset management business a $5 billion collection ofearly-stage businesses that will be enlarged throughacquisitions, but noted that Evercore will operate withvery tough standards and seek partnerships in whichmanagers own a signiicant piece of equity. Together withLarry Fink, Schlosstein co-founded BlackRockin 1988.

In smaller U.S. deals, TIAA-CREF acquired a controllinginterest in Westchester Group, an agricultural asset

THE CONSOLIDATION TREND IN CANADAS

ASSET MANAGEMENT INDUSTRY

CONTINUED APACE.


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Wealth Management

For the second year in a row, the number oftransactions in the wealth management sector

remained modest at just 39 and included just twomajor deals, the most signiicant of which involvedM&T Bank Corp.s acquisition ofWilmingtonTrust(the second saw South Africas Investecaddto its large minority stake in Londons Rensburg

Sheppards; see Cross Border). As was the casewith several signiicant deals in 2009, M&T Banks

purchase of Wilmington Trust was driven by theinancial crisis, as the venerable Delaware-basedbank and wealth manager fell victim to a balancesheet weighed down by souring construction loans.

M&T Bank, of Buffalo, NY, with 750 branches acrossseven states, picked up Wilmington for what was largelyconsidered a bargain price of $351 million in stock avalue nearly 50% below the banks share price just a fewdays prior to the announcement. That announcementcoincided with Wilmingtons large writedown on its loan

portfolio and a third-quarter loss of $365 million, the sixthconsecutive quarterly loss. In addition to the troubledbanking business, M&T gains one of the best-knownnames in wealth management: Wilmington was startedin 1903 by the du Pont family and has $27 billion in AUMin its wealth business, which targets individuals with $10million or more in investible assets.

Outside its wealth advisory unit, Wilmington has another$31 billion in AUM, including a mutual funds line and

Within the U.K., there were two signiicant domesticdeals, both of which targeted irms with traditional andalternative fund businesses. At the start of the year,

Aberdeen Asset Managementpaid $130 million for RoyalBank of Scotlands asset management unit, which had two-thirds of its $20 billion in AUM in long-only multi-managerfunds and 30% in funds of hedge funds. In the near termat least, the acquired alternatives business took a hit,

suffering net outlows of $800 million over the summer,while Aberdeens overall AUM rose slightly.

Aberdeen, which in 2008 added to its large propertyfunds unit with the acquisition of Londons GoodmanProperty Investors, has been seeking to round out itsportfolio with a hedge fund business, driven by CEOMartin Gilberts conviction that the investments havesolid growth prospects. As part of the transaction, RBSagreed to provide Aberdeen preferred access to its wealthmanagement network, including the venerable Britishprivate bank, Coutts & Co. Bruce Van Saun, chief inancialoficer of government-owned RBS, called the deal another

step in our plan to restructure [the bank] around its corecustomer franchises. To help pay for the transaction,Aberdeen did a share placement equivalent to more than8% of its ordinary share capital.

In the second deal between London-based assetmanagers, F&C Asset Managementacquired ThamesRiver Capital, which offers a mix of traditional, specialtyand alternative funds and manages $6.4billion in assets. F&C paid $50 million, aprice that could reach $80 million basedon performance. F&C chief executiveAlain Grisay called the deal an importantcomponent of our strategy of diversifyingour revenues beyond our core insuranceclients while citing Thames Rivershighly complementary set of investmentcapabilities, including expertise inabsolute return. Thames Rivers productsalso deliver superior proitability, withF&C noting the companys average netmanagement fee margin in 2009 of 90basis points of AUM compared with its own22 basis points.

Prior to the deal, the majority of F&Cs$160 billion in AUM was in ixed income

assets while 60% was managed for theinsurance industry, a legacy of its formerparent, insurer Friends Provident. In2009, Friends Provident distributed its majority stake inF&C to shareholders, leaving the irm as an independent,publicly traded asset manager. Thames River, foundedin 1998, manages a broad portfolio that includes globalcredit funds, ixed income, equities, property, multi-manager hedge funds and niche funds such as the Water &

Agricultural Absolute Return Fund (AUM: $38 million).

Wealth Management Transactions

2006 2007 2008 2009 2010


Combined Value ($B) $7.2 $11.6 $5.6 $5.2 $9.9

Total Seller AUM ($B) $284 $227 $388 $246 $518





14/28


Florida. Strategic Financial had $750 million in AUM priorto the deal.

The largest such regional wealth deal involved two KansasCity-based irms, as UMB Financial Corp. acquired PrairieCapital Management, which manages more than $4 billionfor high net worth individuals and institutions. UMB,which last year also acquired institutional manager Reams

Asset Management Co.(see Money Management), saidthe transaction relects its strategic focus on the wealtharena and praised Prairie for its expertise in a range ofasset classes and unique access to many leading globalinvestment managers. Prairie, whose owners includedKansas City investment bankGeorge K. Baum Holdings,will operate as an independent division within UMB.

Portland, Ore.-based insurer StanCorp Financial Group,which targets the massafluent market, acquiredtwo small Indianapolisirms, Redwood Investment

Advisers and Webb

Financial Advisers, in theprocess climbing above the$1 billion mark in AUM.In a transaction betweentwo independent suburbanChicago irms, ForumFinancial Managementmerged with PinnacleWealth Managementtocreate a wealth managerwith more than $500 million

in AUM that operates under the Forum name. The deal wasdriven by the demands of scale and succession-planningissues. Rehmann Financial, a sizable Saginaw, Mich.-basedaccounting, consulting and wealth management irm,acquired two Cleveland wealth managers, Cotter AdvisoryGroup and Dawson Wealth Management, adding atotal of $400 million in AUM to the $1 billion it alreadymanaged. In explaining the decision to sell, Dawson CEOD. Michael Sherman said that in addition to Rehmannsstrong wealth management division, its new ownerprovided a full range of tax, accounting, assurance andbusiness consulting services. Rehmann said it will seekwealth management acquisitions elsewhere in the U.S.

Boston-based wealth manager Silver Bridge extended

its footprint into the San Francisco area via its irstacquisition, ofH&S Financial Advisors, with which it hadan existing client-based relationship. The deal adds around$400 million in assets under advisement to the $1.6 billionSilver Bridge already handled. Simultaneously, SilverBridge announced it would launch Silver Bridge FamilyOfice Partners exclusively for the needs of complexand sophisticated families and family ofices. In anothertransaction involving West Coast expansion, NorthernTrustacquired Waterline Partners (AUM: $800 million)of Los Angeles.

Sanders Morris Harris Group of Houston cut two

assets managed at two afiliates: value investor CramerRosenthal McGlynn and growth manager Roxbury CapitalManagement. Calling Wilmington a big upgrade andaddition to what we do, M&T president Mark Czarneckitold the Buffalo News, We wanted as a bank to diversifyour sources of fee income, and Wilmington gives us thechance to do that. M&T, with a branded lineup of mutualfunds and a trust business, has $22 billion in AUM. On a

pro forma basis, M&T said its fee income as a percent oftotal revenue will jump ive points to 39% while the trustand wealth management component of its fee incomebusiness will more than double to 34%.

BNY Mellon expanded its Canadian wealth business withthe acquisition of Toronto-based I(3) Advisors (AUM:$3.4 billion). BNY Mellon called the deal part of the effortto accelerate our globalexpansion and seize newopportunities in dynamicmarkets. In an interviewwith Reuters following

the acquisition, the newhead of BNY Mellonswealth division, LawrenceHughes, said his groupwill continue to pursueacquisitions in marketswhere the company hasan existing presence. Thewealth division accountsfor around a quarter of therevenue generated by BNYMellons asset managementbusiness. I(3) was started by Ernst & Young in 2005. In

a second and smaller North American cross border deal,Wunderlich Securities of Memphis acquired ive ofRBCWealth Managements Michigan branches to expand itspresence in that state, adding $700 million in assets underadministration. Wunderlich, founded in 1996 and partlyowned by Norways Coil Investment Group, serves privateclients as well as institutions and has $3.8 billion in AUM.RBC Wealth is part ofRoyal Bank of Canada.

Regional and local inancial services irms, which havebeen eyeing wealth management as a way to diversifyand strengthen earnings, were again represented amongbuyers last year. In a deal between two Philadelphia irms,

inancial services irm Drexel Morgan & Co. enhanced itswealth capabilities with the acquisition ofMcCabe CapitalManagers. The deal adds $1.3 billion in AUM and another$500 million under advisement to the $6 billion Drexelalready managed. The company said it will beneit fromMcCabes longstanding relationships with global assetmanagers and expertise in international and alternativeinvestments. McCabe will operate as an independentdivision. Memphis-based Strategic Financial Partnersextended its Southern presence via the acquisition ofPittman Financial Services, an established wealthmanager in Birmingham, Ala., that also has an ofice in

REGIONAL AND LOCAL FINANCIAL SERVICES

FIRMS, WHICH HAVE BEEN EYEING WEALTH

MANAGEMENT AS A WAY TO DIVERSIFY

AND STRENGTHEN EARNINGS, WERE AGAIN

REPRESENTED AMONG BUYERS LAST YEAR.


15/28


very much focused on expanding its wealth business.

Outside the U.S., Scotiabank, which last year mergedits domestic and international wealth managementand insurance businesses, acquired Ontario-basedmultifamily ofice WaterStreet Group and BNP ParibasPanamanian wealth business, including operations inthe Grand Cayman and Bahamas. The Canadian bank,which derives the largest proportion of its internationalrevenues from Latin America, said the BNP deal willenhance [its] existing operations in those markets. BNPhas been under pressure from the French governmentto exit nontransparent inancial markets. Last year, BNPcombined its existing private banking operations withthose acquired from Fortis. Scotiabank called WaterStreetthe anchor for the expansion of its ultra high net worth

business. WaterStreet,formed in 2006, willcontinue to operate underits name. Scotiabankalso made a $2.3 billion

acquisition of mutual fundprovider DundeeWealth(see Money Management).

As part of the effort toreorganize its government-salvaged business,Commerzbankcontinuedto sell off its internationalprivate banking operations,adding Dresdner BankMonaco (AUM: $320

million) to the long list of 2009 divestitures. For Lebanesebuyer Bank Audi sal-Audi Saradar Group, the dealexpands an existing presence in Europe that includesofices in Switzerland and France. Bank Audi, the largestin Lebanon, said the acquisition is in line with its strategyto develop its private banking activities in Europe. In aGerman domestic deal, Spudy & Co. Family Ofice took amajority stake in Dottinger/Straubinger, creating a irmwith $6 billion in AUM and ofices in Hamburg and Munich

Publicly traded securities irm and asset manager CollinsStewartacquired two private client irms through itswealth management unit, including Guernsey-basedCorazon Capital Group (AUM: $570 million). TheLondon-based irm said the deal bolsters its leading

wealth management position in the Channel Islands whilestrengthening its ofice in Geneva, where Corazon also hasa presence. In a second deal, Collins Stewart paid an initial$7.5 million in cash and shares forAndersen Charnley,a London private client irm targeting the upper end ofthe high net worth market. Collins Stewart, which couldpay an additional $12 million in revenue-based incentives,said the deal was driven in part by Andersen Charnleysinancial planning capabilities. With the two acquisitions,Collins Stewart has nearly $10 billion in assets undermanagement and administration and is aiming to reach$15 billion by 2012.

small deals, paying up to $1 million for 51% ofInvestorFinancial Solutions, a California wealth manager with$110 million in AUM; and acquiring 50.1% of HoustonsGlobal Financial Services, with $4 billion in assets.Publicly traded SMH has been transitioning to a purewealth management irm focused on both the massafluent and high net worth markets, having shed itsinvestment banking arm at the end of 2009. The business

is driven by majority-owned Edelman FinancialServices, which added seven new branches last yearin four major metropolitan areas and was named byBarrons the top independent inancial advisor in theU.S. Dallas-based Westwood Holdings Group expandedinto the Midwest through the acquisition of an Omaha,Neb.-based wealth and institutional manager, McCarthyGroup Advisors (AUM:$1 billion). Westwoodcalled the Omaha area avibrant market whileMcCarthy cited the beneitsof expanded investmentopportunities for its clientsand the internal need fora succession plan. Publiclytraded Westwood has seenits AUM double over the lastive years to $10.6 billion,with about $2 billion ofthat in its private wealthbusiness.

Focus Financial Partnersof New York acquired a stake in Bridgewater Wealth& Financial Managementof Maryland, bringing to

19 the number of afiliated companies in its portfolio.In a related deal, Focus afiliate Buckingham Familyof Financial Services acquired Wealth ManagementConsultants (AUM: $400 million), a 20-year-old NorthernCalifornia irm. Buckingham, based in St. Louis, said the

deal presented an opportunity for geographic expansion,among other beneits. A frenetic presence in the wealthacquisition column for several years after its foundingin 2006, Focus hit a inancial speed bump for most of2009 as a result of the economic crisis. An infusion of $50million in late 2009 from two investment irms, includingoriginal investor Summit Partners, placed Focus on irmerfooting and is allowing it to pursue acquisitions again.

The addition of Bridgewater (AUM: $200 million) extendsFocus footprint into the Mid-Atlantic region.

One inancial services irm, Harleysville National Corp.,divested a local wealth manager, Cornerstone Companies,via a management buyout. An established company,Cornerstone has $2.8 billion in AUM and was acquired byHNC in 2006. HNC, which was itself acquired last year byFirst Niagara Financial Group, retained its MillenniumWealth Managementunit, with some $700 million inAUM. John Koelmel, president and CEO of First Niagara,told Pittsburgh Business Times last year that his bank is

FOCUS FINANCIAL PARTNERS OF NEW

YORK ACQUIRED A STAKE IN BRIDGEWATER

WEALTH & FINANCIAL MANAGEMENT,

BRINGING TO 19 THE NUMBER OF AFFILIATED

COMPANIES IN ITS PORTFOLIO.


16/28


17/28


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Asset Management. River Road, based in Louisvilleand founded in 2005 with $30 million in AUM, manages$3.6 billion for institutions, its growth fueled in part bythe distribution muscle of former minority shareholderABN Amro. River Road, which bought out that minorityinterest to become a fully employee-owned company in2008, cited the inancial strength and global presenceof Aviva in explaining the sale. Aviva said River Roads

equity focus complemented itsixed income orientation andcalled the acquisition a signiicantstep in the development of ourbusiness in North America. Avivaalso stressed the continuingindependence of River Roadsoperation.

In the third quarter, EvercorePartners added a cross borderacquisition with an assetmanagement component to

the two domestic deals it madeearlier in the year, acquiring 50% of Brazils G5. Basedin Sao Paulo, G5 is an investment bank and institutionaland wealth manager whose AUM doubled between thethird quarter of 2009 and 2010 to $2.3 billion. Evercorepaid $20 million in cash and securities, with potentialearn-out payments through 2013 and a provision thatallows the New York company to acquire full ownershipbeginning in 2014. In cementing the deal, the two irmsbuilt on a two-year strategic alliance. Ralph Schlosstein,president and CEO of Evercore, called Brazil animportant new market for wealth creation and a greatcountry in which to expand our wealth management and

investment management activities. (See Wealth and MoneyManagement for information on Evercores two other deals.)

Several Canadian irms took advantage of the nationscurrency parity with the greenback to expand in the U.S.These included Toronto-based Foresters, which acquiredNew Yorks First Investors in a deal between two privatelyheld irms with long histories and similar middle-marketcustomer bases. For insurer Foresters, founded in 1874as a fraternal beneit society, the acquisition providesentry to the U.S. asset management market, along with theopportunity for cross-selling on both sides of the border.Foresters has existing insurance operations in the U.S. and

the U.K. A diversiied inancial services irm that includesbroker-dealer and insurance units, First Investors, foundedin 1930, has $6.6 billion in AUM and a large, brandedlineup of mutual funds. First Investors, which will operateas an independent unit within Foresters U.S. division,described the deal as the culmination of a thoroughsearch for a business partner with a capital structure andinancial resources to position it for signiicant growth.

Another Toronto irm, Sprott Inc., paid $90 millionin stock for Rule Investments (AUM: $480 million),a California asset manager and broker-dealer thatspecializes in the natural resource sector. Sprott, which

acquired the asset management unit ofBank of Ireland,which is restructuring its business as part of a governmentbailout. The $80 million acquisition nets SSgA $36 billionin AUM in a broad mix of actively managed funds forinstitutions and intermediaries. SSgA primarily managespassive funds for institutions. The company said theaddition ofBank of Ireland Asset Managementits withits clients demands for more solutions-driven investment

management strategies thatspan the risk spectrum. In asecond transaction involving agovernment-induced divestitureby an Irish bank, BancoSantander acquiredAlliedIrish Banks 50% interest inBank Zachodni WBK AIB AssetManagementof Poland. BancoSantander paid $210 million forthe business (AUM: $3.6 billion)as part of a larger $3.7 billiondeal involving the purchase ofAIBs majority share in Bank Zachodni WBK, a retailand commercial bank. The asset management business isexpected to account for around 6% of the Polish banks netproit in 2011.

Deutsche Bankwas involved in three cross border deals,including a management buyout of its New York-basedquantitative irm, QS Investors(see Alternatives). Theacquisition also took place in New York, with the Germanbank picking up ive target-date exchange traded funds(ETFs) from XShares Advisors, with $140 million in AUM.XShares was founded in 2005 but struggled for much of itsbrief life, having liquidated nearly two dozen specialized

ETFs heavily weighted toward health care. Followingthe Deutsche Bank deal, parent company XShares Groupchanged its name to BNDRE Holdings and said it wouldfocus on the U.S. distressed real estate market. A third dealsaw Deutsche Bank take a 49% stake in New ZealandsCraigs Investment Partners, which has brokerage, assetmanagement and wealth management businesses. In 2009,Craigs management bought the 50% stake owned by RoyalBank of Scotland (which RBS acquired from ABN Amro in2007).

Macquarie Group of Australia acquired the Austrian assetmanagement business of German electronics, energy and

health care giant Siemens AG, Innovest Kapitalanlage AG.The Vienna-based business manages approximately$5 billion for institutions in Germany and Austria,including the Siemens pension fund, with a specializationin risk-budgeting and asset allocation strategies.Macquarie said the deal provided a new hub forMacquarie Funds Group in Central Europe consistentwith Macquaries strategy to develop a global assetmanagement irm.

Aviva Investors of the U.K. crossed the Atlantic to make itsirst acquisition since its formation in 2008 by insurancegiant and parent Aviva, buying value investor River Road

TORONTO-BASED FORESTERS

ACQUIRED NEW YORKS FIRST

INVESTORS CONSOLIDATED.


19/28


which has a West Coast banking presence and a minoritystake in Morgan Stanley, has set aggressive goals for itsinternational business. Japanese banks in general areseeking a larger international footprint to counteract thediminished prospects they face at home.

Spanish bankBBVA formed a private banking joint venturewith the inluential Chinese investment irm CITIC,building on a related management agreement the two

companies signed in late 2009.That same year, BBVA alsoraised its stake in China CITICBankto 15%. A China-focuseddeal within Sweden saw EastCapital acquireAsia GrowthInvestors (AUM: $340 million),an asset manager specializingin Chinese investments. EastCapital manages $6 billion inassets, with a focus on EasternEuropean inancial markets.

Having two specializedinvestment teams under thesame roof covering these twoexciting parts of the emerging

markets universe will be a very valuable additionaloffering to our investors, says Peter Elam Hakansson,chairman of East Capital.

In India, a high-proile transaction with an assetmanagement component involved Sumitomo MitsuiFinancial Groups $300 million purchase of a 4.5%stake in Kotak Mahindra. Founded in 1985 and nowthe nations fourth-largest private bank, Kotak Mahindramanages a total of around $8 billion in mutual funds,having registered 89% growth in AUM during its iscal2009 year (the industry as a whole saw 52% growth). Inaddition, Kotak Mahindra has $1.2 billion in assets undermanagement and advice in real estate and private equityfunds. In 2009, the government imposed new regulationson the Indian mutual fund industry that limited fees andprovided for greater transparency.

In a deal involving an Indian buyer, Religare Enterprisescrossed the Paciic to pay $200 million for a majority stakein San Franciscos Northgate Capital (AUM: $3 billion),a private equity fund of funds irm that includes threeformer professional football players among its founders.

Ten-year-old Northgate serves institutions and high networth individuals. Religare, which in 2009 made a bid withMacquarie Group forAmerican International Groupsexternal asset management business, says it plans tospend up to $1 billion to build a diversiied U.S.-basedglobal asset management company with a goal of takingit public. Religare chief executive Sunil Godhwani said thepartnership with Northgate will accelerate our processof seeking similar partnerships in other asset classes,including both alternatives and traditional in developedand developing markets. For Northgate, the link withReligare provides greater access to emerging markets.

also manages natural resource investments, said theacquisition will diversify its product line and asset andearnings mix. In addition, the company views the additionof Rule as a means of expanding into the U.S. market withits branded line of funds. We really look forward to beingthe footprint for Sprotts U.S. growth across a range ofproducts, said Rick Rule, chairman of Rule Investments.Publicly traded Sprott, which had $6 billion in AUM

prior to the deal, could payadditional performance-basedincentives in 2015. In a thirddeal involving a Canadianbuyer and American seller,mutual fund giantCI Financialacquired the Canadianfund business ofHartfordFinancial Services Group,consisting of 18 diversiiedfunds with $1.7 billion inAUM. CI Financial describedHartfords Canadian unit asone of the nations fastest-growing fund companies witha strong lineup of portfoliomanagers and excellent relationships with dealers andadvisors. Hartford said the divestiture was in line with afocus on its core U.S. operations.

Asias two key emerging markets continued to drawmultinationals in search of partners. China registeredseveral deals, in line with recent trends, including BNYMellons assumption of a 49% stake in a fund managementjoint venture with Western Securities, a 9-year-old Xian-based brokerage. BNY Mellon, which in 2009 was granted

status by the Chinese government as a qualiied foreigninstitutional investor, said it would initially target the retailmarket but also plans to pursue subadvisory mandatesfrom non-Chinese institutional investors. Separately, BNYMellon signed a memorandum of understanding with theShanghai Stock Exchange to collaborate on ETFs that willbe tied to BNY Mellon Depository Receipt Indices.

In a bid to capitalize on the expected growth of sociallyresponsible investing in China, Italys ECPI and ChineseSecurities Index Company (CSI) formed a joint ventureindex linked to sustainable Chinese companies. The CSI

ECPI China ESG 40 Equity Index will be made up of 40

Chinese companies adhering to environmental, social andgovernance (ESG) principles. ECPI, which completed amanagement buyout last year from parent Mittel Group,is a sustainability research, ratings and indices providerin business since 1997. CSI is a joint venture betweenthe Shanghai and Shenzhen stock exchanges. MitsubishiUFJ Financial Group became the irst Japanese irm toinvest in a Chinese fund joint venture, as it bought BNPParibas 33% stake in 6-year-old SYWG BNP Paribas

Asset Management(AUM: $1.5 billion). The French bankwas forced to sell to comply with Chinese regulationsdisallowing multiple fund joint ventures. Mitsubishi,

IN A DEAL INVOLVING AN INDIAN

BUYER, RELIGARE ENTERPRISES CROSSED

THE PACIFIC TO PAY $200 MILLION FOR

A MAJORITY STAKE IN SAN FRANCISCOS

NORTHGATE CAPITAL.


20/28


Real Estate

Against the backdrop of what appears to be astabilizing if still uncertain property market, the

real estate advisory sector last year registered animpressive 18 transactions valued at $960 million,with several of the deals driven by post-inancialcrisis corporate reorganizations. The lineupof buyers included such signiicant players asGuardian Life Insurance Company of America,

Island Capital Group andRockefeller GroupInternational. The slowly-but-surely consolidatingadvisory sector could witness a particularlyimportant deal this year ifING Groep inallydivests its large real estate business, an action

the irm reviewed last year. Morgan Stanley,which suffered signiicant losses in its MSREF VIInternational real estate fund, is also mulling theoptions for its advisory business.

The Rockefeller Group International (RGI) investmentin European real estate fund manager Europa Capitalmarked the expansion of the groups large and diverseproperty business into Europe across multiple risk/return strategies and asset classes, Rockefeller said in astatement. Founded in 1995 and based in London,Europa has raised six real estate funds and invested

$8 billion throughout Europe; it has $2.8 billion in AUM.RGI, owned by Mitsubishi Estate Co. took a majoritystake in Europa, with management retaining a signiicantminority interest. Kevin Hackett, president and CEOof RGI, called the investment a signiicant step in therealization of a RGI/MEC global real estate investmentmanagement platform. Calling this a dynamic time forthe real estate market and property fund managementbusiness, Europa said it had signiicant scope fordeveloping our business from its established base throughthe introduction of a strategic investor.

A second transatlantic deal involved a management

buyout of two Merrill Lynch property funds by theirEuropean investment team. The new London-basedirm that emerged, Peakside Capital, acquired MerrillsEuropean Real Estate Opportunity Fund and BosphorusReal Estate Fund I, with a combined $635 million incapital commitments. Peakside, which will continue tomanage legacy investments from Merrill parentBank of

America, said it intends to capitalize on opportunitiesthat are rapidly emerging in real estate in Europe. Merrilldescribed the holdings as non-core. In a second buyoutinvolving a non-core divestiture by a large parent, KBC

Asset Managementof Belgium sold its U.K. subsidiary

Sumitomo Mitsui Financial Group was involved in asecond cross border transaction within Japan, forming aprivate banking joint venture with Barclays that drawsits name from both irms. Barclays, seeking to expand itswealth management footprint, said its partner providesunparalleled access to the Japanese high net worthclient base. In 2008, SMFG acquired a minority stake inBarclays as the British bank, reeling from the inancial

crisis, sought to bolster its capital base. In 2009, theSMFG acquired Citigroups Japanese brokerage, NikkoCordial. Although Japan is the worlds second-largest

wealth market, investors are far more conservative thanin other parts of Asia, showing a decided preference forcash investments.

Within the U.K., Tokyo-based Mizuho Financial Groupsold its debt-management business (AUM: $6 billion)to London private equity irm 3i Group for $29 million,with 3i taking a 55% stake and management the rest.Mizuho Investment Management (U.K.), establishedin 2005, managed funds that invest in senior andsubordinated corporate debt. 3i, with an existing butsmall credit unit, said the acquisition will create anenhanced debt platform to grow proitably into thefuture. The company, like other private equity irmsnegatively impacted by the inancial crisis, has beenseeking to diversify its earnings.

In the hedge fund industry, where cross border activityregularly accounts for a large majority of deals, buyerscontinued to look outside their domestic markets,including Credit Suisse, Gottex Fund ManagementandNatixis Global Asset Management(see Alternativessection).

IN THE HEDGE FUND INDUSTRY,

WHERE CROSS BORDER ACTIVITY

REGULARLY ACCOUNTS FOR A

LARGE MAJORITY OF DEALS, BUYERS

CONTINUED TO LOOK OUTSIDE THEIR

DOMESTIC MARKETS.


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the strategy he employed in the 1990s to the presentenvironment, involving the acquisition of real estatedebt derivatives and the creation of special servicing andrelated businesses to manage them.

Guardian Life Insurance acquired a substantial, non-controlling interest in Lowe Enterprises real estateadvisory unit, Lowe Enterprises Investors. As part of

what the companies called a strategic partnership, theNew York-based insurer will invest more than$200 million to expand Lowes portfolio. Lowe EnterprisesInvestors, based in Los Angeles, has $6 billion in

diverse real estate assets managed individually and incommingled funds. Lowe Enterprises Investors co-CEOBrad Howe said the partnership positions us to takeadvantage of the recovery of the real estate market andwill allow us to better serve our clients by improving ourcapital resources. Similarly, Guardian said the currentenvironment offered an opportune time to invest in realestate while praising the track record of its partner.

Trecap Partners bought the real estate equity investmentadvisory business of troubled Capmark Investments(AUM: $4.3 billion), including investment management

to local management. The new company, reorganized asLothbury Investment Management, specializes in directand indirect property investments in Europe and has$1.3 billion in AUM.

BMB Group, an aggressive alternative asset managerbased in the Cayman Islands and co-founded by a memberof Bruneis royal family, made its presence felt withtwo European acquisitions designedto expand its portfolio of real estateinvestments. In the irst, BMB acquiredLuxembourg-based Contrarian CapitalPartners and its advisory subsidiary,Beacon Hospitality Partners, which hasa client base similar to its new parentsof Middle Eastern and Asian investors. Inexplaining the deal, BMB referenced theenormous opportunities in real estateglobally being generated in the presenteconomic environment. In the seconddeal announced shortly thereafter, BMB

committed to invest $500 million inDutch real estate advisorAlliance CapitalGroup (AUM: $3.7 billion) in return fora shareholding in a new company, BMB

Alliance. Alliance, which has commercialproperty investments in Europe, said thelink with BMB will provide access to new sources of capitalas it seeks to consolidate an industry-leading position inthese turbulent times.

In other European deals, Austrian property developer CAImmobilien Anlagen paid $370 million for the Europolisreal estate unit ofOesterreichische Volksbanken AG,with half the price deferred over ive years. Europolis, alsobased in Austria, adds more than $2 billion in commercialproperty assets in central and eastern Europe to the$5 billion CA Immo already managed. CA Immo said it isconident that this is a good time in the property cycle tobe investing in [Eastern Europe] for the long term. In asecond domestic deal in neighboring Germany, propertycompany Mann Immobilien-Verwaltung acquired morethan 18% of the shares in IVG Immobilien, a real estatemanager with $31 billion in AUM.

There were several domestic U.S. deals of note. One ofthe more interesting developments involved the returnto the distressed property market of real estate investor

Andrew Farkas, who made a wager on the commercialmortgage-backed securities market with the purchase ofCenterline Holding Co.s CMBS fund management andloan special servicing businesses. The deal was donethrough C-III Capital Partners, a new subsidiary of Farkasprivately held real estate irm, Island Capital Group. Thedeal involved consideration of $110 million, consistingof $50 million in cash and $60 million in assumed seniordebt. Based in New York, Farkas made his name andfortune during the 1990s by purchasing distressed realestate limited partnerships. Farkas said the creation ofC-III represents the adaptation and implementation of

Real Estate Transactions

2006 2007 2008 2009 2010


Combined Value ($M) $1,536 $2,044 $358 $280 $960

Total Seller AUM ($B) $31.1 $53.6 $20.8 $13.8 $79.8




THERE WERE SEVERAL DOMESTIC U.S. DEALS

OF NOTE. ONE OF THE MORE INTERESTING

DEVELOPMENTS INVOLVED THE RETURN TO

THE DISTRESSED PROPERTY MARKET OF REAL

ESTATE INVESTOR ANDREW FARKAS.


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amassed $153 billion in earnings since setting up shop.As institutions replace wealthy individuals as the primaryinvestors in 2009, institutions accounted for 75% ofassets at the 11 largest hedge funds ranked by Pensions &Investments funds run by the likes of Paulson and Soroscontinue to gain dominance in an industry with as many as7,000 players.

The latest survey by Pensions & Investments indicates

that its universe of 95 companies managing at least $1billion in hedge fund and funds of hedge funds assets heldnearly half the $2.2 trillion in industry assets, while the25 largest companies accounted for 30% of that total. ARmagazine estimates that U.S. hedge funds with $5 billionor more in AUM recorded a 1% increase in assets duringthe irst half of 2010 while the irms above $1 billion sawtheir AUM decline or latten out. In the second quarter of2010, Hedge Fund Research said that 93% of net inlowswas placed with managers handling $5 billion or more.In addition, although 342 companies with more than $1billion in AUM represented just 5% of the hedge funds inHFRs data base, they accounted for 76% of assets.

In line with these trends, in 2010, two of the industrysbiggest players teamed up in one of the largest hedgefund deals to date. Man Groups $1.6 billion acquisitionofGLG Partners places the London irm among thetop two industry leaders, with more than $50 billion indedicated hedge fund AUM. In total, there were 20 hedgefund deals valued at $2.8 billion in what turned out tobe a particularly robust 2010, along with two othertransactions of note that incorporated an important hedgefund element.

The Man-GLG deal pairs two publicly traded andcomplementary irms that have experienced sharply

diminished performances since the start of the inancialcrisis: Man saw its AUM drop in half from a 2007 peakwhile GLG watched $10 billion in AUM disappear in 2008,in part due to the departure of noted emerging marketsfund manager Greg Coffey. Effectively, the deal allows bothirms to replace lost assets, with GLG adding$24 billion in AUM to the $39 billion Man managed priorto the deal, including $12 billion in long-only funds (themajority acquired from Societe Generale in 2009). Thetwo irms also display little overlap, with GLG providinga discretionary investment style that balances Mansquantitative orientation, as well as a customer base that

contracts and general partnership interests in real estateequity funds in the U.S. and Europe. Capmark Investmentsiled for Chapter 11 in January 2010, just a few monthsafter parentCapmark Financial Group took the sameaction following a downturn in its commercial propertybusiness. Philadelphia-based Trecap was formed in 2009by several veterans of Equitable Real Estate InvestmentManagement to provide investment management and

consulting services to institutions and high net worthadvisors. One of those principals, Douglas Tibbetts, in 2009called the current environment the real estate SuperBowl of the century if investment management irms arewell-capitalized and deploy the capital wisely.

In an Australian transaction, property fund managerCharter Hall Group paid $270 million for a majority ofMacquarie Groups real estate management platform,transforming itself into one of the nations largestspecialist real estate fund managers, with some $9 billionin AUM, two-thirds derived from Macquarie. Macquarie,which has been exiting its traditional listed specialist real

estate management fund business as part of a strategicrestructuring, received cash as well as a 10% shareholdingin Charter Hall. The deal includes Macquaries interestsin ive real estate investment trusts (two listed and threeunlisted) as well as management rights to the businesses.Prior to the transaction, Charter Hall ran a range ofspecialist unlisted funds.

Hedge Funds / Private Equity

Since its founding in 1994, New York hedge fundPaulson & Co. has earned nearly as much asaircraft manufacturer Boeing, according to a studybyLCH Investments and reported by the FinancialTimes. Boeing employs 158,000 people worldwideand in 2009 delivered 481 commercial airplanes,121 military aircraft and six satellites. Privatelyheld Paulson, which garnered public attentionin 2008 following the stratospheric returns it

generated betting against the subprime mortgagemarket, probably employs less than 100 peopleand in truth produces nothing more tangible than

inancial models.

Paulsons outsized success is testimony to both theevolution of the post-industrial economy and the richesaccrued by the winners in his particular industry. Oneof the oldest hedge funds, George Soros QuantumEndowment fund, has earned $32 billion during its37-year life, while the top 10 hedge funds in total have

IN 2010, TWO OF THE INDUSTRYS BIGGEST

PLAYERS TEAMED UP IN ONE OF THE

LARGEST HEDGE FUND DEALS TO DATE.


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Signiicantly, Credit Suisse said it had discussed thetransaction with regulators to ensure it was not runningafoul of new rules that limit the amount of capital bankscan contribute to hedge funds. In its press release, thebank emphasized it was taking a non-controlling interestin the management company, not an investment in the

funds. In 2008, Credit Suisse also took a minority interestinAberdeen Asset Managementin a deal that involvedthe sale of its long-only fund management business.

Separately, Credit Suisse acquired Fortis BankNederlands Prime Fund Solutions business, a leaderin hedge fund administration services, while a team ofcommodities traders at Credit Suisse left to form theirown hedge fund, according to the Wall Street Journal.

The commodities group is reportedly being backed byBlackstone Group, which has raised more than $1 billionin its Strategic Alliance Fund II to seed new hedge funds.Blackstone also took a 40% stake in a Brazilian alternativeinvestments irm, Patria, which manages $3.2 billion inprivate equity, real estate, infrastructure and hedge funds.Blackstone said the deal will allow its partners and clientsto beneit from the fast-expanding business opportunitiesin the country.

The second major bank deal saw JPMorgan Chase alsohead to the hot Brazilian market to pay $270 million fora 55% share ofGavea Investimentos, which manages $6

billion, primarily in hedge fund and private equity assets.Gavea was co-founded in 2003 by Arminio Fraga, who wasa fund manager for George Soros before becoming Brazilscentral bank chief in 1999. The deal was done throughJPMorgan Chases alternative asset manager, HighbridgeCapital Management. Calling Fraga one of the inestglobal macroeconomic hedge fund managers in the world,Highbridge said the tie-up provides clients with the idealcombination of local emerging markets expertise withthe global platform ofJ.P. Morgan Asset Management.Recently, a number of alternative investors have starteddedicated funds or set up shop in Brazil.

includes ultra high net worth clients on the retail sideand sovereign wealth funds on the institutional end. Bycontrast, Mans retail customers tend to come from themass afluent market and its investors from regionswhere GLGs presence is weaker or nonexistent, such asAsia-Paciic, parts of Europe including Switzerland, andSouth America.

In 2007, after 12 years as a privateconcern, GLG became the irst purehedge fund to go public on the NewYork Stock Exchange, through a reversetakeover by a special purpose acquisitionvehicle, Freedom Acquisition Holdings.After climbing nearly 50% that year,the shares turned south in 2008 withits performance and the larger market.In the Man deal, public shareholdersreceived a cash price of $4.50 per sharethat represented a 55% premium toGLGs closing price at the time of the

deal in mid-May, albeit half of GLGs $10loat price. The three principals andother employees who owned 50% of GLGreceived $3.50 worth of new Man sharesfor each GLG share they owned, leaving the principals witha 10% stake in their new parent.

Man, which said the transaction could yield $50 millionin annual savings and would be earnings accretive in its2012 iscal year, paid nearly 7 percent of AUM and 24times 2010 consensus earnings. GLG represents the secondmajor acquisition Man has secured in less than a decade,the irst being the $833 million deal in 2002 for RMFInvestment Group, a Swiss fund of hedge funds manager.

At the time, RMF nearly doubled Mans AUM to $20 billion.Man has also taken stakes in several other hedge fundsover the years.

There were two other large deals by banks, both of whichcrossed borders. Credit Suisse Group paid $425 millionfor 30% of New Yorks York Capital Management(AUM:$14 billion), with earn-out payments that could drive theprice higher based on ive-year performance. An event-driven investor in the equity and credit markets, Yorkwas founded in 1991 and by 2000 had amassed$600 million in AUM. Between 2002 and 2005, however,Yorks fortunes took off, with AUM jumping more than

ivefold to $7.6 billion, driven by performance and growinginvestor interest in the asset class. During that sameperiod, York chairman and CEO Jamie Dinan earned a fewheadlines for picking up the Fifth Avenue residence ofdisgraced former Tyco CEO Dennis Kozlowski at less thanthe asking price a measure of revenge for Dinan, whoseirm lost money on Tyco.

Credit Suisse, which aims to become a global leaderin multi-asset-class solutions as well as alternativeinvestments, said the relationship with York provides itsclients with access to a top-tier suite of products whileYork cited the Swiss banks global reach and resources.

Hedge Fund Transactions

2006 2007 2008 2009 2010


Combined Value ($M) $1,570 $8,399 $1,417 $201 $2,792

Total Seller AUM ($B) $57.6 $133.0 $46.2 $19.7 $125.0





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Deutsche Bank executed a spinoff from QS Investors,taking the German bank with it as a client. QSI, formedin 1999 and previously part of the banks institutionaladvisors unit, has $11 billion in AUM and another$70 billion under advisement across a range of strategies.Deutsche also did a spinoff of a second New York assetmanagement arm with $9 billion in AUM, subsequentlynamed Global Thematic Partners. An institutional

and retail manager, GTP makes thematic investments,including a signiicant niche in global agribusiness.Another German inancial services irm,Allianz Group,

sold its fund of funds unitto Nexar Capital Group ofNew York and Paris. Nexarsaid the deal reinforcesour capabilities in Europe.A fund of funds manager,Nexar was started in2009 by former hedgefund managers at SocieteGenerale with backing frominancial services privateequity investorAquilineCapital Partners. With theacquisition, Nexar has more

than $3 billion in AUM.

Goldman Sachs bucked the trend of bank divestitures ofalternatives by taking minority stakes in two U.S. hedgefunds, including Level Global Investors, a 7-year-old irmthat generally focuses on the direction of stock prices inthe technology and inancial sectors. Level Global wasfounded by Dave Ganek, who cut his teeth in the hedgefund industry atSAC Capital Advisors. The second deal

was for Mount Lucas Management, a global macromanager with $1.8 billion in AUM that was founded in1986. Both deals were done through Goldmans London-based hedge fund acquisition vehicle, Petershill, bringingits total number of investments to seven. Another NewYork irm,AllianceBernstein, acquired the hedge fundand private equity unit of insurer SunAmerica. ABcalled the deal part of the strategic expansion of ouralternative investment capabilities. In its latest annualreport covering the 2009 year, AB reported $3.9 billion inalternative AUM, about two-thirds of which was managedfor private clients, primarily in hedge funds. That totalrepresents a tiny part of ABs AUM ($484 billion), but

chairman and CEO Peter Kraus, installed in December2008 and the former co-head of asset management atGoldman Sachs, has put more emphasis on expanding thealternatives business, with AB having recently introducedreal estate and energy funds.

AllianceBernsteins majority shareholder, French insurerAXA, bought out managements 25% share ofAXARosenberg, a California-based quantitative managerbadly damaged by revelations that senior investmentoficers had waited months to reveal coding errors inits computer-based risk program. The errors stretched

Another major New York bank, Morgan Stanley,restructured its relationship with hedge fund FrontPointPartners (AUM: $7 billion), with management taking amajority stake while Morgan Sta

2011 Berkshire Investment Management Review

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