Morgan Stanley To Acquire Minority Stake in Avenue Capital
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
Morgan Stanley, the second-biggest securities firm by market value, agreed to purchase a minority stake in Avenue Capital Group, a hedge fund manager with $12 billion in assets that buys debt of ailing companies.
Terms of the agreement, under which Avenue will remain an independent firm, weren’t disclosed in a statement released by Morgan Stanley today. The company is paying about $280 million for slightly less than 20% of the New York-based hedge fund, said two people familiar with the situation who declined to be identified.
Morgan Stanley, led by Chief Executive Officer John Mack, managed $76 billion of so-called alternative assets in hedge funds and private equity as of August 31, about half as much as rival Goldman Sachs Group Inc. Morgan Stanley also may buy part of hedge fund FrontPoint Partners LLC in Greenwich, Connecticut.
Avenue Capital, founded 11 years ago by Marc Lasry and his sister Sonia Gardner, invests in distressed companies that might not repay their creditors. The company will invest all of the money received from Morgan Stanley into the funds it manages.
Avenue Capital’s funds in America and Europe are up about 10% so far this year, one of the people familiar with the transaction said. Returns from hedge funds have been ebbing as money pours into the capital pools, whose managers keep a portion of the profits they generate for investors.
Gains averaged 1% from March 31 to September 30, according to Chicago-based Hedge Fund Research Inc., trailing the 3.2% advance of the Standard & Poor’s 500 stock index.
