Crosby's Apollo launch no fix after Forsyth problem

LONDON Thu Nov 20, 2008 11:00am EST

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LONDON (Reuters) - Crosby Asset Management's CSBq.L bid to draw in money with fund manager Tom McGrath is unlikely to deflect attention from its crumbling asset base and an ill-timed acquisition last year.

Apollo Multi Asset Management, the ailing fund firm's new joint venture with McGrath and several other managers, may struggle to find asset gathering easy in falling markets, when investor appetite to put money into funds has plummeted.

And what looked like a shrewd deal at the time -- the high-profile acquisition of funds from Forsyth Partners which had gone into administration -- now no longer does.

"These are difficult times. We'll be relying on switching money from old supporters and money from other parts of the world," McGrath told Reuters.

The September 2007 deal with Forsyth, which had over-expanded in Dubai, brought in $1.2 billion in assets at a time when client money was hard to come by, but market carnage and huge investor outflows have since decimated those holdings.

Assets at Forsyth have now tumbled to just $112 million, after allowing for recent fund closures and a backlog of redemptions from its fund of hedge funds and before allowing for market falls in the fourth quarter.

"Clearly if we'd known what was going to happen in the market we wouldn't have bought it," Crosby's Chief Operating Office Steve Fletcher told Reuters in September this year.

Reuters at the time revealed the firm was in talks to sell or liquidate a range of Dublin-domiciled funds due to redemptions, and sell two Bermuda-based portfolios.

Crosby's share price has lost 94 percent so far this year, as overall assets fell to $1 billion by September from $2.5 billion at the end of the last year.

The outflows have contributed to a third quarter pretax loss of 13.33 million pounds, also partly due to a rise in administrative and other operating expenses.

Ever since, Crosby Asset Management -- 84.35 percent owned by Hong Kong-listed Crosby Capital (8088.HK) -- has declined to comment at all on its business.

But assets will almost certainly fall further, after warnings about Forsyth and Crosby's part-owned wealth management business, which has seen assets slump due to losses on structured products and investors moving assets out.

Crosby has tried to sell and is now closing Forsyth funds -- many of which were charging high fees of 2 percent despite holding some normally inexpensive long-only or tracker funds -- and has parted company with staff such as fund manager Seamus Lyons.

Crosby's recent financial woes and the slump in its share price are telling a story that is only too evident.

"It's all far too visible," said Stephen Bailey, fund manager at Walker Crips, which now has a "negligible holding" of around 20,000 pounds in Crosby.

With its 50/50 joint venture with Apollo -- a firm based in Crosby's offices -- Crosby is now taking on more of a venture capital role.

Apollo is set to launch multi-manager cautious and balanced funds next week, but raising assets may prove a tougher and longer process than previously believed, McGrath conceded.

"I'd have liked to have (started) with a big bash, but (assets) won't be anywhere near 100 million pounds. If it's 40 million pounds by the year-end we'll be perfectly happy," McGrath said about Apollo Multi Asset Management.

(Editing by Douwe Miedema and David Cowell)

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