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Hedgeweek Comment: Hedge funds banking on IPO route

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Many hedge fund and fund of fund managers have been analysing the IPO route lately.

Many hedge fund and fund of fund managers have been analysing the IPO route lately. Just four days after fund of hedge funds manager FRM disclosed plans to offer its flagship diversified strategy through a listed fund, Brevan Howard, one of Europe’s largest hedge fund managers, unveiled long-mooted plans to proceed with a London fund flotation that seeks to raise USD500m.

Earlier this year, Marshall Wace announced plans to list its USD2bn MW Tops fund in London, a year after its debut in Amsterdam. And although BlackRock missed its USD500m target for its fund of hedge funds feeder vehicle, it still managed to attract at least USD275m from European and UK institutional investors and wealth managers in an uncertain market.

Why this sudden explosion of IPOs? One reason is easing of the rules for listing on the London Stock Exchange’s Main Market, including a provision allowing dual listings. But mostly fund IPOs are becoming an attractive route for managers to increase assets and diversify their revenue streams.

With increased competition and global uncertainty, a listed vehicle is a good way to capture investor interest. As one hedge fund manager puts it: ‘It is basically a move toward permanent capital.’

The fact that many funds are following the IPO route is an indication that investor interest is out there, which goes to show that even in the current investment climate, well-founded IPOs will attract solid support.

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