ABN Amro to invest €100m in hedge fund

ABN Amro to invest €100m in hedge fund

By James Mackintosh in London

Published: November 26 2006 21:18 | Last updated: November 26 2006 21:18

ABN Amro is set to invest as much as €100m ($131m) in a new listed hedge fund managed by Marshall Wace. The Dutch bank joins Deutsche Bank and Merrill Lynch as core shareholders of the €1.5bn MW Tops.

The new fund from the London manager is proving popular and is expected to be fully subscribed today or tomorrow, according to people familiar with the situation.

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Deutsche and Merrill have both committed to buy 9.9 per cent, with Merrill capping its investment at €120m. All three of the big banks – two of which are also bookrunners for the flotation – would see their investments cut back if the fund is more than fully subscribed by its IPO date of December 8.

The planned investment by ABN, which is expected to be approved this week, demonstrates the premium major banks are putting on access to hedge funds they can sell on to wealthy customers through their private banks and brokerages.

Several big banks, most recently led by Morgan Stanley, have spent hundreds of millions of dollars buying minority stakes in hedge fund managers in an attempt to secure preferential access to their funds.

ABN and Marshall Wace declined to comment.

The listing of MW Tops on Euronext in Amsterdam is being closely followed by many hedge funds and investment banks who hope to follow it with a series of new funds.

“Everybody is looking at Marshall Wace to see whether it is a success or not,” said Robin Bowie, chairman of Dexion Capital, which runs several London-listed funds of hedge funds.

The test is likely to be not just the capital raised but whether, like the $5bn Kohlberg Kravis Roberts private equity fund listed earlier this year, MW Tops falls to a discount to its net asset value.

The company has been structured carefully in an attempt to avoid discounts, but Mr Bowie and bankers working on the IPO said it would be hard for other hedge funds to follow suit, partly because of the need to continue to market the listed vehicle to investors in the secondary market.

“Everybody and their brother want to meet to discuss this,” said one banker. “But it is still going to be tricky for single manager funds that rely entirely upon very bright people with a hot hand.”

If they come, further single-strategy funds are likely to be listed on Euronext rather than London thanks to regulatory restrictions.

“Euronext has stolen a march on the LSE [London Stock Exchange] because the LSE has not been flexible enough in allowing single managers to come to market,” Mr Bowie said.

The Financial Services Authority hastily reversed a planned rule change two weeks ago in an attempt to attract more alternative listed funds, such as single manager hedge funds and private equity, but they cannot hold a primary listing, only a secondary listing.

The FSA will shortly consult on changing the rules for primary listings.

Copyright The Financial Times Limited 2006