Private equity pioneer KKR is acquiring 24.9 percent of Marshall Wace, the London-based hedge fund firm founded in 1997 by Paul Marshall and Ian Wace. The cash and stock deal also allows KKR’s ownership stake to increase over time to 39.9 percent. Marshall Wace specializes in equity long/short strategies. It also has a marketplace lending business, MW Eaglewood, which specializes in direct lending and peer-to-peer investment strategies. KKR also cited Marshall Wace’s “premier franchise” in the liquid alternatives sector as a reason for the deal.
“Over the last few years, we have been approached by several firms looking to invest in our business, but KKR offered something different: a true, long-term partnership,” said Ian Wace in a statement. Shares of KKR fell nearly 3 percent Wednesday.
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Republican presidential candidate Jeb Bush unveiled a comprehensive tax plan that in part takes aim at alternative investment firms. First of all, it calls for ending the favorable tax treatment for carried interest, which would hurt some hedge fund firms. In addition, his plan would eliminate the deduction of interest on debt incurred by companies. When he heard this on CNBC, hedge fund titan James Chanos of Kynikos Associates asserted that this provision would kill the private equity business. “This is a radical departure,” Bush stated. “We’re rewarding equity and investing in hard assets.”
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Chanos also said on CNBC Wednesday that liquefied natural gas appears to be a “looming disaster,” sending shares of long-time hedge fund favorite Cheniere Energy down more than 3 percent to close at $54.99. In his appearance, Chanos added: “We’ve been pretty negative for the past six months on this LNG space. LNG demand isn’t growing anymore. We already have excess capacity, and we’re about to pretty much almost double the capacity globally over the next four years.” A majority of the energy company’s top-ten holders are hedge funds, including four among the top five: Boston-based Baupost Group; Greenwich, Connecticut-based Viking Global Investors; New York-based PointState Capital; and Greenwich, Connecticut-based Lone Pine Capital.
