ABN Amro Asset Management says its deal for a fund of hedge funds manager would not only more than double its assets in hedge funds but also enable it to expand distribution to midsize institutional clients and eventually to the United States.
Frank Goasguen, the global head of institutional sales at the ABN Amro Asset Management unit of the Amsterdam banking company ABN Amro Holding NV, said it has offered funds of hedge funds only to large institutional investors and some private clients. Most of its distribution has been through Europe, he said.
But the definitive agreement announced Friday for 100% of the share capital of International Asset Management, a London and New York fund of hedge funds company with $2.6 billion under management, should enable ABN Amro to expand distribution, he said.
With the popularity of alternative investment products rising, Mr. Goasguen said, ABN Amro wants to begin targeting midsize institutions and private clients.
“We perceived this market as a growth market,” he said. “The allocation for funds of hedge funds is there to stay, and these products have grown dramatically in the past year. Allocating money to hedge funds is not just a fashion. We think there will be steady growth and, over time, we will be able to take this to new markets and down-market.”
ABN Amro’s existing fund of hedge funds operation, which has $1.4 billion under management, is to be consolidated with International Asset Management. The deal is scheduled to close this quarter. Its terms were not disclosed.
Mr. Goasguen said ABN Amro hopes to begin distributing funds of hedge funds in the United States, adding it to the 20 nations where it already offers hedge funds. The company has an institutional presence in the United States, he said, but hopes to use International Asset Management to gain a foothold here for hedge fund sales.
“I think the first step we’ll have to take care of is on a regulatory front” in the United States, he said. “The process is a little longer to get things approved for sale of these products in the U.S. We will go through this process.”
He said he hopes first to offer hedge funds of funds to U.S. institutional clients and, over time, to expand distribution to private clients through private banking channels.
“To develop a presence in any country, you need a dedicated local presence,” Mr. Goasguen said. “A lot of competitors have a slide-in strategy. We want to be close so we can target clients better than competitors who’d just fly in to make a sale.”
Analysts said assets held in hedge funds have grown steadily in the past five years as alternative investments have become an important part of a balanced portfolio. The $1.1 trillion-asset hedge fund industry has more than doubled in the past five years, according to data from Hedge Fund Research Inc. in Chicago. Last year, hedge funds earned a record $16 billion of fees.
Mr. Goasguen said that, in view of hedge funds’ growing popularity, ABN Amro is exploring ways to bring them down-market to mass-affluent customers.
“There are still a number of regulatory limitations,” he said. “It is still not obvious how mass-affluent and retail customers will be able to access funds of hedge funds.” The company is not planning any more acquisitions to enlarge the business, he said, but expects strong organic growth the next five years.
