HFA Investments made an impressive debut on the Australian Stock Exchange yesterday with its stock leaping from $1.10 to close at $1.39. “It has been a pretty healthy day,” HFA founder and chief executive Spencer Young said. He was happy with the institutional investors who had supported the offering. HFA is a fund of hedge funds group with $2.1 billion under management. Fund of hedge funds groups invest in different hedge funds to produce a low-risk blended return. HFA’s ready acceptance by the public market reflects the growing popularity of hedge funds in Australia.
Shares in Pengana Hedge Fund Managers and Everest Babcock & Brown have recently recovered from long periods of underperformance and the global hedge fund business is doing better after a difficult 2005. The Credit Suisse/Tremont hedge fund index was up 5.46 per cent in the first three months of the year.
Mr Young thinks that his group has some distinct advantages over its peers. “We have a very strong distribution capability,” he said. The group had 15,000 investors, whom it reached through financial planners. “We have a unique business. It is the equivalent of a mutual fund in the fund of hedge funds business.” HFA’s sales force travels the country educating financial planners on the attractions of hedge funds. The rationale for the IPO was partially to fund expansion.
But it was also to crystallise the position of HFA’s senior executives, who are also among the group’s largest investors. Mr Young made more than $66 million from the float, part of which he will reinvest in a 12.6 per cent stake in HFA. The names of his colleagues stud the list of HFA’s top 20 investors. HFA was owned by MFS before the sale, and MFS remains the largest shareholder with just under 38 per cent, followed by Mr Young.