BOSTON (Reuters) - Hedge fund industry veteran Philip Duff is setting his sights on acquiring an asset management firm at a time he says big corporations are ready to leave the management of their pension funds to someone else.
Duff made his name at legendary hedge fund Tiger Management, as a chief financial officer at Morgan Stanley (MS.N) and the co-founder of FrontPoint Partners, a $5.5 billion hedge fund manager that Duff sold to Morgan Stanley in 2006 as part of the bank’s alternative investments push.
Last year he formed Duff Capital Advisors, a company that promises to help endowments, pension funds and insurers solve their biggest dilemma — meeting their long-term obligations.
“We are looking for something to buy,” Duff said in an interview, adding that he expects a lot more consolidation in the highly fragmented $50 trillion fund management industry. At the moment, Duff said he is not managing money.
Duff did not say how much he has to spend on deals, but he nearly walked away with a portion of the industry’s biggest deal of the year: Barclays PLC’s (BARC.L) sale of its massive Barclays Global Investors unit this summer.
“We wanted to buy a portion of BGI,” he said, targeting the institutional money management business and leaving the exchange-traded funds business to his acquisition partner. Ultimately, BGI was sold to BlackRock Inc (BLK.N).
Duff said he takes great pride in having forced the winner to raise its price. “We got them to pay $3 billion more,” he said.
Right now he is less willing to say which companies might tempt him, worrying instead about what he calls the generally low quality of companies that might be for sale.
Still, Duff sees enormous potential demand for an integrated, comprehensive money management business. Chief executives and chief financial officers at top U.S. companies are eager to potentially outsource the running of their pension funds to outsiders like him.
“The day we started Duff Capital, we got a call from a CFO at a top U.S. company in the general voicemail box asking us to meet with him,” Duff said.
“Corporations are looking for more integrated solutions,” he added, saying that his type of business could be in for boom times.
Last year’s financial crisis hit Duff Capital like many other asset managers. Since then, Duff has had to change his strategy. Initially armed with $500 million in equity capital from private equity firm Lindsay Goldberg, Duff at the time told Reuters he planned to raise between $1 billion and $1.5 billion to seed investment funds.
Yet the fund raising environment has been tough during the past year on even the biggest, most established firms, he said, let alone start-ups promoting some new investment approaches.
Reporting by Joseph A. Giannone and Svea Herbst; Editing by Richard Chang