Goldman Takes Stake In Claren Road Hedge Fund Firm - Sources

Date: Friday, April 4, 2008
Author: Jed Horowitz, CNN Money

LONDON -(Dow Jones)- A private equity fund of Goldman Sachs Group Inc. (GS) has added another hedge fund investment to its portfolio, people familiar with the matter said Wednesday, marking the third stakebuilding in a hedge fund firm this week by a bank or asset manager.

Petershill Fund, a private investment fund that is run from London as part of Goldman Sachs' asset management unit, took a minority stake in New York-based Claren Road Asset Management, the people said. Claren Road manages about $2.7 billion in its Claren Road Credit Fund, taking long and short positions in credit instruments.

Terms of the transaction weren't disclosed, but hedge fund businesses are typically valued at 10%-15% of assets under management.

The purchase comes after Morgan Stanley (MS) said Tuesday that its investment management unit had bought a minority stake in London-based Hawker Capital Ltd., a commodities-focused manager. The bank has made a series of stake purchases in hedge fund groups over the past couple of years.

On Monday, U.K. hedge fund giant Man Group PLC (EMG.LN) said it was buying 50% of New York credit specialist Ore Hill, through a deal that in turn gives Ore Hill a half-stake in Man's Pemba Credit Advisers business.

The stake purchase is Petershill's third-known acquisition since July, when it bought just under 10% of London's Winton Capital Management, a managed futures specialist that had about $9.5 billion in assets at the time.

In February, Petershill bought 19.99% of Capula Investment Management, also of London, which manages about $1 billion.

The acquisition of the Claren Road stake was first reported on the Web site of trade publication Hedge Fund Alert earlier Wednesday.

Banks and asset managers have been snapping up stakes in hedge funds over the past several years, as these investment pools gain assets at a faster pace than many other types of funds. The purchasers get access to the funds for their clients, as well as a share of management and performance fee revenue.

For the hedge fund firms, selling a stake can be a way for partners to cash out some of their equity, and to set a value on the business for employee share schemes.

-By Margot Patrick, Dow Jones Newswires; +44 20 7842 9451; margot.patrick@ dowjones.com

(Jed Horowitz reported from New York.)