Man Group to buy Swiss rival RMF for £570m

Man Group, the asset management group, is to buy a Swiss rival in a £570m deal that turns it into the world's largest hedge fund operator.

The acquisition of RMF will boost Man's sales to institutional investors, which are currently skewed towards private investors, Stanley Fink, Man's chief executive, said.

RMF has £5.8bn of funds under management, and the enlarged group will operate hedge funds totalling almost £14bn. Its nearest rivals manage no more than £9bn.

Man is buying the 10-year-old RMF for a mixture of shares and cash. The cash portion was part funded by a £223m placing of new Man shares with institutional investors.

The deal will net an estimated £170m for RMF's founder, Rainer-Marc Frey, who will stay on and join the board of Man. He will also be Man's largest private shareholder, owning about 4 per cent as a result of the sale.

RMF is based in Pfäffikon, the same Swiss village as Man's European operations, and Mr Fink said the business would be a good cultural fit.

"Their headquarters are a few yards down from us, I know them well from when I was out there, I used to play five-a-side soccer with them. Our chief investment officer said when he first met them that it was like meeting a twin that had been separated at birth," he said.

He said the sheer scale of the combined business would allow it to attract talented new fund managers. "People typically only want to move if they are given £100m to run, but at the moment we don't give our new managers that. This will give us enough money to tempt them across and to get them set up."

There will be no redundancies at the combined group, although planned staff expansion will no longer be necessary as the head offices in Pfäffikon are merged.

Mr Frey said: "We share a philosophy and attitude of focus and commitment which has driven the successful growth of both our businesses."

Man shares fell in early trading as Merrill Lynch launched the placing, but the new shares were three times subscribed within an hour. The shares were placed at lunchtime at £9, a 5 per cent discount to Wednesday's closing price, and recovered to close up 12p at 960p. The rise in Man's share capital will swell its market value to £3bn.

Man Group entered the FTSE 100 last September. The company can trace its history back to 1783, when James Man set up a sugar trading business. The company grew to become one of the world's biggest traders of commodities, while the hedge funds business grew out of the need to hedge the group's exposure to fluctuating commodity prices. The agricultural businesses were finally sold off in 2000.

Demand for alternative investments such as hedge funds has ballooned during the bear market for equities. In the year ended 31 March, Man sold £3.6bn of funds and made £117.6m in management fees, up 66 per cent on the year before.

But there was disappointment with the additional bonus fees, which are linked to the performance of its funds. These fell 27 per cent to £55.2m as a result of a poor run by its flagship AHL fund.