JP Morgan has teamed up with Crestline Investors, a Fort Worth, Texas-based fund of funds with $7.3 billion of assets under management, to help investors unwind their legacy positions in illiquid hedge funds and other assets. The initiative will see JP Morgan assist Crestline in sourcing these assets in the marketplace.
“For many hedge fund investors, it’s time to move on,” said Thomas Doyle, the recently-appointed head of fund-linked product structuring at JP Morgan in London. “The market has seen a variety of approaches to the management of legacy positions in hedge funds over the last few years but the combination of attractive pricing in the secondary market, the calibre of interested counterparties, and the ability of new market participants to engage in large-scale structured transactions now makes divestment of these assets compelling”.
The secondary market in illiquid hedge fund shares has developed substantially since its infancy in 2009, with various market estimates indicating that hedge fund investors are still holding up between $50 billion and $60 billion of illiquid assets in Europe.
But the market is dominated by just a small number of specialist fund managers, such as Crestline, who are increasingly securing investment from institutional clients who have significant amounts of capital to deploy in this sector.
“We are delighted to work with JP Morgan in identifying investors interested in divesting legacy hedge fund shares,” said Douglas Bratton, president and chief investment officer of Crestline.
“We look forward to having discussions with interested parties on meaningful, private divestures of their illiquid positions. Crestline’s industry-leading hedge fund secondary platform will ensure firms have the opportunity for genuine bilateral negotiation and creative asset structuring.”
Crestline has already raised approximately $1.2 billion in capital for this initiative since 2009 with a target final close for their third fund in November 2013, which makes them amongst the biggest players in this market, according to JP Morgan’s Doyle. He added that it is a good example of how the US bank can assist firms across their business cycles, whether it be investing or divesting themselves of assets.
Following its purchase of Northwaters and Lyster Watson’s businesses, Crestline now offers low volatility and customised hedge fund of funds, opportunistic and customised investment programmes including a family of opportunistic strategies, hedge fund secondary investments and private credit funds and tailored beta and hedging strategies.