RenTec considering selling equity stake in its $20 bln equity hedge fund

Discussion in 'Wall St. News' started by makloda, Aug 28, 2007.

  1. (Not sure why looking for equity investors is automatically a bullish sign. Maybe RenTec doesn't see things as rosy and wants to bring in outside equity capital and partners?)

    Bullish US hedge fund may sell stake

    By Ben White in New York

    Published: August 27 2007 22:00 | Last updated: August 28 2007 00:56

    Renaissance Technologies, the $30bn hedge fund run by billionaire mathematician James Simons, is considering selling a minority stake to a big outside investor or group of investors in coming weeks.

    The move suggests that Renaissance, one of the world’s biggest hedge funds, may believe the crisis in the US credit markets and the global flight to safety among investors will be short-lived and that there will be ample opportunity for it to continue to earn its historically high returns.

    The bullishness shown by Renaissance comes as hedge fund groups such as AQR and private equity firms including KKR are proceeding cautiously with planned initial public offerings.

    The Renaissance group said it had no current plan to sell a stake or stakes.

    A person close to the matter said discussions about stake sales took place some months ago. But another person close to the matter said that as markets have become more stable in recent days discussions have resumed at Renaissance.

    Other groups have also started talking about possible stake sales.

    It is not clear what size stake Renaissance, a highly secretive group, would sell but it is assumed current management would retain full control of the group.

    It is also not clear how Renaissance would be valued. Fortress Investment Group, the hedge fund and private equity firm that went public this year, manages about $43bn and has a market value of about $7.3bn.

    Renaissance is said to be considering direct stake sales similar to those being considered by SAC Capital, because they would allow the group to raise capital without being forced publicly to reveal significant information about its trading strategies. An IPO would require such disclosure.

    SAC has marketed possible stakes in its management company to foreign investors including Asian state funds such as Temasek of Singapore.

    The Financial Times reported in an early edition that Renaissance was considering selling the stake via Opus 5, a private placement platform being set up by a group of investment banks. It is now understood that any stake sales would be direct to investors rather than through Opus 5.

    Other private investment groups are considering selling private placement shares through Opus 5, which was launched this month by Morgan Stanley, Lehman Brothers, Citigroup, Merrill Lynch and the Bank of New York Mellon.

    The platform - first revealed by the Financial Times in July - is intended to compete with existing markets for private placements set up by Bear Stearns, Goldman Sachs and JPMorgan. Friedman, Billings, Ramsey has also been a big user of the 144A market.

    The possible move by Renaissance, which manages mainly quantitative funds that make big bets on scores of different securities and currencies, comes in spite of recent conditions that have dented returns at many funds, including Renaissance.

    None the less, people close to Renaissance note that its flagship Medallion fund is still up for the year.

    Medallion, which now consists mainly of Mr Simons’ and other Renaissance employees’ money, has returned an average of 36 per cent per year, after fees, since its launch in 1989. That makes Mr Simons the most successful hedge fund manager yet.

    Mr Simons took home $1.7bn last year, according to Institutional Investor’s Alpha Magazine. Mr Simons, a former professor, is now heavily involved in philanthropy, especially in the area of maths education.

    Renaissance launched a new fund in 2005 targeting institutional investors and has so far gathered more than $20bn on the way to what Mr Simons says could be as much as $100bn, which would make it the largest fund in history.

    The new fund, Renaissance Institutional Equities Fund, charges fees close to the industry standard 2 per cent of assets and 20 per cent of profits.

    It gained about 20 per cent last year.