Its competitors may be shutting down hedge funds right and left, but for private equity luminary KKR, now seems to be the time to get in, and in a big way.
The Wall Street Journal reports that the vaunted private equity firm has taken a 24.9% stake in Marshall Wace (MW), the London-based, $22 billion long-short equity hedge fund run by Paul Marshall and Ian Wace.
How much KKR valued its stake is currently unclear, though the acquisition was apparently a stock and cash deal with MW partners receiving 7.4 million shares in KKR worth $20 each.
It isn’t just a straight-up purchase though; according to the Independent, the sale comes in two stages. The first involves an injection of cash from KKR which will be locked up until 2020, with the aforementioned KKR stock vesting in 2018, and in the next comes a possible 15% increase in KKR’s stake at the firm by 2019, with half of the additional proceeds reinvested in the fund and the other half used to snap up KKR stock until 2022, the time when Marshall, Wace, and Anthony Clarke get to cash out of the deal.
None of them seem to be particularly eager to do so however, as Ian Wace told the WSJ:
“We were never interested in a financial deal…This is all about the next 18 years of our life, not the first 18 years of our life.”
The move effectively returns KKR smack bang on the hedge fund map, a place it was initially hesitant to join in and was ultimately unsuccessful at following the closure of its Goldman Sachs Principal Strategies group-manned hedge fund last year.
Photo: Esther Dyson