AMG is offloading its majority stake in struggling hedge fund BlueMountain for $91 million
- Affiliated Managers Group sold its majority stake in Andrew Feldstein's BlueMountain Capital to Assured Guaranty, a Bermuda-based municipal bond and infrastructure insurer, for $91 million.
- The deal is expected to close at the end of the year, and Feldstein will net $22.5 million in shares of Assured Guaranty as a part of the deal.
- BlueMountain's performance struggles this year forced AMG to write-off a $415 million loss earlier this year, and the hedge fund recently lost its head of fundamental credit.
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For $91 million, Affiliated Managers Group has sold its share in Andrew Feldstein's struggling BlueMountain Capital roughly 12 years after buying it.
The deal, which was reported by Bloomberg on Wednesday and then confirmed by a statement from AMG, will close at the end of the year, when Assured Guaranty, a Bermuda-based insurer of bonds and infrastructure, will take control of the credit-focused hedge fund.Assured also bought out the partners at BlueMountain, leaving Feldstein with roughly $22.5 million in Assured shares and a new title of CIO and head of asset management.
Feldstein's co-founder Stephen Siderow will keep his title as co-president of BlueMountain.
"We are pleased to have had a good partnership with BlueMountain over many years, and also that we worked closely with our long-term partners at BlueMountain to achieve an outcome that is in the best interests of BlueMountain's clients and employees and AMG's shareholders," said AMG CEO Jay Horgen in the statement.
BlueMountain's tough run to start 2019 was not easy on its performance or its biggest backer. The firm's flagship fund, the Credit Alternatives fund, faltered as others in the industry notched impressive returns, and AMG was forced to take a $415 million write-down on its BlueMountain stake.
The hedge fund was working to meet profitability targets that AMG was pushing for by the end of year, which included cutting the firm's long-short equity and systematic equity strategies. The firm was also tied up in the utility PG&E, which was found to be at least partially responsible for some of California's deadly wildfires in 2017 and 2018.BlueMountain decided to axe the two equity strategies and focus on its strengths, such as the credit investments the firm made its name on. But the firm's head of fundamental credit, Omar Vaishnavi, left just a month after giving an investment pitch on the fund's behalf at a New York conference.
Assured will hold its second-quarter earnings call on Thursday morning. The company plans on spending $90 million on BlueMountain's operations within a year of the deal closing, and will invest another $500 million into BlueMountain products over three years.
"We have been searching for the right asset management platform for over three years, and we found it in BlueMountain, a seasoned asset management firm with a compatible credit culture, complementary market knowledge and the scale to make a material contribution to Assured Guaranty's profitability," Dominic Frederico, Assured Guaranty's chief executive officer, said in the statement.