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London Law Firm Snaps Up Rivals Amid Hedge-Fund Shake Up

MJ Hudson agrees to buy Allenbridge and Tower Gate Capital

 
 
A view of London Bridge across the River Thames. MJ Hudson, a London firm that provides legal services to fund managers, has bought two smaller firms to take advantage of investor pressure on some of the world’s biggest hedge funds.ENLARGE
A view of London Bridge across the River Thames. MJ Hudson, a London firm that provides legal services to fund managers, has bought two smaller firms to take advantage of investor pressure on some of the world’s biggest hedge funds. PHOTO:BLOOMBERG NEWS
By 
LAURENCE FLETCHER
Nov. 14, 2016 2:05 a.m. ET

MJ Hudson, a firm that provides legal services to fund managers, has bought two smaller firms as it tries to bulk up and take advantage of investor pressure on some of the world’s biggest hedge funds.

The London-based firm said it had bought investment consultant Allenbridge and fund-services provider Tower Gate Capital for a mixture of cash, shares and earn-outs.

The deals will create a firm advising more than 300 asset managers with over £200 billion in assets in areas such as private equity, hedge funds, real estate and infrastructure. The firm will also advise and provide other services for more than 100 institutional investors with over £500 billion in assets.

The acquisitions come at a time of growing M&A activity in the hedge-fund industry, amid pressure on fees and lackluster returnsfrom many managers in recent years.

Hedge funds are up 3.6% on average this year, and have lost money in three of the previous eight calendar years, according to Chicago-based data group HFR.

MJ Hudson Chief Executive Matthew Hudson said that some of the world’s biggest hedge funds had recently begun to see pressure from their investors to scale back and outsource their huge back-office operations, which can employ hundreds of people. Investors were concerned that hedge funds didn’t lose focus on investing and controlling costs.

“They’re saying [to hedge funds], ‘are you really the best people to manage 50 lawyers or 100 compliance people?’” Mr. Hudson said. “If the trend of large-cap outsourcing were to continue, we need to be a lot bigger.”

Last year Brevan Howard, one of the world’s biggest hedge funds, cut around 10% of its 400-strong workforce, predominantly in back and middle office functions, after poor returns from many of its funds.

Mr. Hudson added that prices of deals had been “very hot in the private equity space” in recent years. He declined to say how much the firm had paid in the two deals.

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