Wed, 26/09/2007 - 08:13
Prominent US asset manager MFS Investment Management has announced its entrance into the alternative investments business with the establishment of a subsidiary to provide seed and expansion capital to emerging hedge fund managers.
The new company, Four Pillars Capital, will be run as a separate entity from MFS. The two businesses will not share investment resources, although MFS will provide operations, marketing and distribution support to Four Pillars.
'Our institutional clients are increasingly demanding alternative investments to complement long-only strategies and diversify their portfolios,' says MFS president and chief executive Robert J. Manning.
'Our evolution into the alternative investments business is a natural and thoughtful extension of our core business. Complementing our long history of innovations in active management, we are now strongly committed to providing a range of alternative investing solutions for our institutional clients.
'We have created a new subsidiary to provide seed and expansion capital to help talented emerging hedge fund managers build their businesses. Many are looking for support in such areas as operations, marketing and sales, which a relationship with MFS and Four Pillars can help provide.'
Four Pillars will be headed by president Thomas A. Knott, a 23-year veteran of the investment management business who was a co-founder in 1998 of K Capital Partners, a value-oriented hedge fund focused on European and North American investments. His senior management team includes chief investment officer Eric Lass, who was formerly managing director and portfolio manager of K Capital's Credit Opportunities Fund.
Four Pillars will focus on finding managers who have built successful records with other organisations and are in need of seed capital to launch their own firms. It also will provide expansion capital to existing hedge fund managers who have successful records and are looking to scale up their operations.
The company plans to focus on hedged strategies that do not rely on the extensive use of leverage or illiquid private securities to generate returns. 'We're looking for strategies that rely on the manager's fundamental analytical skill to produce attractive risk-adjusted returns,' Knott says.
'The ability to align with a major organisation such as MFS for operational and systems support will be an added plus for the managers receiving seed capital. Hedge fund failures are commonly the result of operational problems. MFS will provide extensive operational support in addition to state-of-the-art risk management tools to help mitigate this risk.'
MFS, which managed USD202bn in assets at the end of June for more than 5 million individual and institutional investors worldwide, traces its origins to 1924 and the creation of America's first mutual fund.
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