KKR buys hedge fund provider Prisma Capital

(Reuters) - Kohlberg Kravis Roberts , the private equity company, has bought hedge fund money manager Prisma Capital Partners LP, marking the latest move by the private equity sector to boost assets by bolting on smaller funds-of-funds shops.

Founded by three former Goldman Sachs Group Inc partners, Girish Reddy, Thomas Healey and Gavyn Davies, Prisma uses a fund-of-fund strategy for an institutional client base of insurance companies, institutional investors, endowments, pension plans and family offices. More than 90 percent of its $7.8 billion in assets under management belong to institutional investors.

Reddy will run KKR & Co LP's global hedge fund of funds business, working with KKR executives globally. Healey and Davies will become senior advisors to KKR.

As part of the agreement, all cash proceeds received by management at closing will be reinvested in Prisma funds. The money management unit of Dutch insurance company Aegon, which also helped set up Prisma in 2004, will sell its minority stake in the firm, but remains a significant investor in Prisma's funds.

Assets invested with funds-of-funds managers have fallen in the few last years, even though investments in the hedge fund industry as a whole continue to grow past the $2 trillion mark set last year.

This makes life for the smaller funds of funds tough while the biggest players on Wall Street such as Blackstone Group LP , which has its BAAM unit, appear to be having little trouble attracting institutional investors and using that money to help seed some of the industry's potential new stars.

The Prisma transaction is expected to close in the fourth quarter of 2012 and the financial terms were not disclosed.

Goldman Sachs served as financial advisor to Prisma and Aegon. Schulte Roth & Zabel LLP served as legal counsel to Prisma and Aegon. Simpson Thacher & Bartlett LLP acted as lead legal counsel to KKR.

(Reporting By Nadia Damouni in New York; editing by Andre Grenon)

WhatsAppFacebookTwitterLinkedinBeloudBluesky