Marketwatch – A rash of initial public offerings by hedge funds expected this year will let ordinary folk invest in the asset-management world’s raciest vehicles. But could investors end up driving lemons rather than limos?
The planned U.S. stock market debut this year of hedge-fund giant Fortress Investment Group is spurring rivals to consider their own IPOs, a move that would enrich founders and other owners but raises questions for future investors.
Hedge fund company stocks present new risks unlike investing in a traditional asset management company like Legg Mason Inc. or T. Rowe Price Group . How the new shares perform partly depends on why firms are going public and how diversified they are.
“Simply wanting to sell half your hedge fund business at an inflated multiple isn’t necessarily going to win friends and influence people in the stock market,” said Geoff Miller, an analyst at Bridgewell Securities, a London-based investment bank and stockbroker. “Investors need a rationale for (going public).”
Most management companies in the hedge fund universe are still too small and too focused on a specific investment niche to be publicly traded, he added.
