Knight Assets Said Raising Fund Charging No Management FeeBy
London-based asset manager said targeting $500 million total
Fund to focus on investments in mid-sized global companies
Knight Assets & Co., a London-based investment firm led by former Deutsche Bank AG and Bank of America Merrill Lynch employees, has raised about $300 million for a new equity-focused fund that will not charge management fees, according to a person familiar with the situation.
Knight, which began seeking new cash in mid-September, is targeting $500 million in total and wants to reach that fundraising goal by early next year, the person said, asking not to be identified ahead of an official announcement. The money manager will charge performance fees of as much as 25 percent depending on returns, according to an investor presentation seen by Bloomberg News. A representative of Knight declined to comment.
The hedge funds industry in Europe is shrinking as firms close and startups become rarer because of mounting costs and poor performance. Investors have pulled about $77 billion from hedge funds globally this year, according to data provider eVestment, as they push back against high fees for low returns. Since the start of 2015, about 569 hedge funds have closed in Europe, while only 489 have started operations, data from Eurekahedge shows.
The firm is led by Chief Investment Officer Akshay Naheta, a former Deutsche Bank AG trader, and Head of Research Mohsin Rashid, who previously worked as a mergers banker at Merrill Lynch and Rothschild. Knight plans to continue its prior focus on investments in a relatively small number of mid-sized public companies, the person said.
Since it was created in 2011, Knight’s $416 million in investments have yielded an average internal rate of return of 112.5 percent, according to the investor presentation, largely by deploying what it calls "constructive activism" to boost share prices.
Those stakes included positions in Rolls Royce Holdings Plc, India’s Tata Motors Ltd., and AerCap Holdings NV, an Irish-based aircraft lessor. The most lucrative was a 369 percent internal rate of return on $30 million invested in Eros International Plc, a Bollywood film studio group that Knight exited after questions emerged about its corporate governance practices, according to the presentation.
Knight’s new fund will target between 10 and 15 investments, with a maximum of 25 percent of the original capital committed to any one security, unless investors waive that limitation, the presentation said. It does not intend to take significant short positions, the person said.
Some managers have cut management frees after pressure from investors. Louis Bacon’s $14 billion Moore Capital Management is cutting the fee on its Macro Managers fund in January, according to a letter to investors that was viewed by Bloomberg. Brevan Howard Capital Management LP stopped charging a management fee on profits generated by BH Macro Ltd., a listed fund that invests in Alan Howard’s main hedge fund, in October.