04/03/2010 Author: Elana Margulies

Fortune Group plans expansion into the US

The surge of UK hedge fund managers into the US continues unabated. The trend, highlighted in last week’s edition of HFMWeek, for European hedge funds and fund of hedge funds (FoHF) managers to expand their businesses in the US gained another follower, as Fortune Group announces aggressive growth plans, HFMWeek can exclusively reveal.

The UK-based hedge fund and FoHF manager, set up by Simon Hopkins and Richard Tarvin in 1996, is looking to form joint ventures with US wealth management firms to distribute to trust clients in the US, as well as set up partnerships with regional banks in the country.

The market is ripe for expansion, with Union Bancaire Privee and Lyxor Asset Management both also expanding their presence in the US. Lionel Erdely, CEO of Lyxor in the US, said: “It [the fallout in 2008/09] was good timing because as the industry was retrenching we were able to further develop globally and in the US.” Part of that development at Lyxor could include an acquisition to enhance its ETF business in the US. Lyxor is rumoured to be looking at targets for a potential deal to be completed before the end of the year.

Frank Casey, president of Fortune USA, confirmed Fortune’s own expansion plans, identifying Close Brothers Group’s desire to rebrand itself as a private wealth manager and investment advisory operator, as key to the strategy.
The moves were triggered when LSE-listed Close Brothers Group completed the full acquisition of Fortune Asset Management in January. The British merchant bank had first acquired a stake in the business in 2006.

 “The marketplace is going to emerge again and I think there is tremendous opportunities in that,” Casey said. “I can help second-tier-type banks and wealth management shops that don’t have tremendous in-house staff,” said Casey.
Fortune’s tie-ups with a US wealth management firm and regional banks will consolidate on its position in the North American market. In December 2008, Fortune entered into a partnership with Canada-based HighView Financial Group to provide alternative assets to wealth management firms, including advisory firms, asset managers, family offices and some institutions.

Fortune will also shore up its existing US business by establishing more extensive due diligence teams in New York and Boston to bolster the contact it has with its mainly US-based underlying managers. Approximately five-to-seven people will come on board in New York and conduct due diligence on hedge funds. In Boston, additional staff will join who will be responsible for due-diligence on long-only portfolios.

As part of its ongoing investment strategy Fortune is looking to allocate to managers in four different buckets: liquid alpha, hedged equity, distressed debt and emerging markets. Within each of these groups, there are 8-12 managers and will add more as opportunities arise. Allocation sizes typically range from 50m.

At the same time, Fortune will evolve out of its core business and move into a broader range of alternative and traditional investments, HFMWeek has learned. Fortune will target real estate, venture capital and long-only strategies to define itself as a manager of managers across multi-asset classes.

Following the full merger, Simon Hopkins, who co-founded Fortune in 1996, has been assigned to run the institutional asset management business at Close, while Nancy Curtin became the chief investment officer of the unit.
Close Brothers Group’s stock price, as of 2 March, was 683p. Fortune advises on over £3bn ($4.48bn) of investments.