Mutual fund giant Franklin Resources (NYSE: BEN) has announced that it will acquire a majority stake in K2 Advisors for an undisclosed amount. K2 is one of the largest of the so-called funds of hedge funds. The deal is expected to close at the end of the year, pending regulatory approval.
K2, which manages about $9.3 billion in assets, will use the proceeds to buy back its stake held by TA Associates and to retire its debt obligations. Franklin oversees approximately $731 billion in assets, and in this deal gains the right to start buying the rest of K2 beginning in 2016. The deal also allows it to offer its wealthy investors more access to some popular hedge funds.
“One of the ways that we have built Franklin Templeton’s global business is by making strategic investments in smaller, highly experienced asset management companies whose expertise complements Franklin Templeton’s global offerings and meets our world-class standards,” said Greg Johnson, CEO of Franklin Templeton Investments. “This new relationship with K2 is an important step in our overall plan to expand Franklin Templeton’s alternative strategies and solutions platform.”
The past few years have been tough for funds of hedge funds, with investors pushing back against hedge funds fees in light of hedge funds’ questionable returns of late. More buyouts by companies eager to move into the space are likely, as are closures of endangered firms that fail to strike a deal.