Hedge Funds Appear More Listing-Friendly

Date: Friday, November 10, 2006
Author: Dailyii.com

In what some are calling an unusual twist, it appears that hedge funds listing on stock exchanges may be getting a better reception than private equity funds, which started the trend. The New York Times reports that hedge fund Boussard & Gavuadan Holding, founded by two Goldman Sachs alumni, raised more than a half billion dollars when in its initial public offering on Euronext – four times it original target. But p.e. funds have not been enjoying the same type of success, not since Kohlberg Kravis & Roberts hauled in $5 billion earlier this year in its IPO. That was three times its target, but, as The Times reports, KKR has not had particularly good follow-up and its share price has dipped more than 10% since then. That led to a string of p.e. funds either postponing their IPOs or revising down their prospects, blaming lower demand. And U.K.-based Doughty Hanson decided against listing for now because of “concerns over the trading performance of similar recent transactions.” Part of the problem, is that KKR, Bill Barnard of Dresdner Kleinwort told The Times, “came in and muddied the pitch by raising so much and doing little with it.” He goes on to say that KKR’s investment strategy at this point is “not exactly clear,” and that “investors may feel somewhat shortchanged.” Some of those investors are hedge funds. And so when Boussard & Gavaudan listed, perhaps fellow hedgies were banking on its success because of certain advantages hedge funds have over a p.e. listing, such as making many investments in liquid markets, as opposed to p.e.’s illiquid purchases, and the fact that they can produce returns soon after the fund-raising, as opposed to private equity funds, which can take longer to make a profit. The Times says that bankers point to p.e fund structure as “the real problem.” In the case of the KKR Private Equity, The Times notes, the fund ended up lowering its value almost immediately after it paid €70 million in advisory fees.