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Manulife is buying CQS, the UK credit investor founded by Lord Michael Hintze, as the Canadian insurer and money manager seeks to bulk up in the fast-growing area of private credit.
The deal, announced on Wednesday, hands the Canadian group CQS’s brand, platform and $13.5bn in assets under management. Current CQS chief executive Soraya Chabarek will continue to manage the business as it is folded into Manulife Investment Management, which has $746bn in AUM.
However, 70-year-old Hintze, a prominent Conservative party donor and philanthropist, will step back from the firm he founded in 1999. The flagship Directional Opportunities hedge fund that he runs, which has roughly $1.5bn in assets, will spin out into a new firm that he will personally manage. Roughly $500mn to $600mn in assets that are not in the the flagship hedge fund will also leave with Hintze.
Terms of the transaction were not disclosed but are not material for Manulife’s investment management business, which is particularly strong in North America and Asia. The global group has a substantial alternative investments arm but has only a nascent private credit business. The deal will also give Manulife a much higher profile among institutional investors in the UK and Europe.
CQS’s assets have dropped from $21bn in 2022 to $15.6bn today, after a tough period of performance during the pandemic. Hintze’s flagship fund took a 34.8 per cent hit as a result of structured credit bets that lost money in 2020.
The deal is scheduled to close early next year, subject to regulatory approval.
Paul Lorentz, chief executive of Manulife Investment Management, said that the group is not seeking major cost savings from the combination: “The real value of this is in the revenue synergies,” he said. “There are so many opportunities for growth.”
CQS operates a range of funds that trade instruments including structured credit, convertible bonds, asset-backed securities and equities, based on geopolitical, economic and market analysis.
The groups have been talking about a deal for nine months. “I think the most attractive thing for when we first met was Manulife’s mantra which was really creating and allowing for investment autonomy. This was important for us,” Chabarek said. “They spent a great deal of time understanding what we do and how we do it.”
In recent years, CQS has repositioned away from its roots in hedge funds, expanding its long-only business, which today accounts for around 90 per cent of assets under management and commands lower fees.
The departure frees up Hintze to focus on the strategy that brought him prominence. He is an adviser to the Duchy of Cornwall, the Prince of Wales’ private estate. London’s Natural History Museum renamed its main entrance hall Hintze Hall in his honour.
Hintze was born in China to Russian émigrés and raised in Sydney after his family left China when Mao Zedong and the Chinese Communist party took over power. A former captain in the Australian army, he moved into finance with spells at Salomon Brothers, Goldman Sachs and Credit Suisse First Boston. From there he spun out the Convertible and Quantitative Strategies business as CQS in 1999.
“I’m delighted that CQS has found the right partner in Manulife Investment Management,” he said.
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