Big funds' tastes fuel Wall St hedge fund buys

Date: Friday, April 13, 2007
Author: Reuters

NEW YORK (Reuters) - Institutional investors' preferences to work with the big investment banks they have long known is one reason Wall Street titans are snapping up the loosely regulated portfolios, a hedge fund manager said.

"The reason we are seeing more consolidation in the hedge fund community is tied closely to the interest of institutional money going into hedge funds," Richard Bookstaber told the Reuters Hedge Funds and Private Equity Summit in New York on Wednesday.

"If you are a pension fund going into hedge funds you'd feel more comfortable dealing with larger institutions. They have natural links already," said Bookstaber, who recently published "A Demon of Our Own Design:Markets, Hedge Funds, and the Perils of Financial Innovation", and is the principal of the FrontPoint Quantitative Fund.

Bookstaber's fund was acquired was acquired by Morgan Stanley (MS.N: Quote, Profile, Research) last October.

Many investments banks and even mutual funds are racing to buy hedge funds or take minority stakes in them to offer new products to their clients and also cash in on the high fees that hedge funds can earn, other industry analysts have said.