Investment bank Morgan Stanley was in advanced talks last Friday to acquire a 20 percent stake in the hedge fund firm Avenue Capital Group, Reuters reported. The deal would value the firm, which buys distressed debt worldwide, between $1.5 and $2 billion.
This is the latest addition to the trend of investment banks buying stakes in hedge funds.
Last month Credit Suisse Group and Ospraie Management LLC formed an alliance. Credit Suisse committed global distribution support and $500 million toward the New York-based investment management firm that oversees $4 billion.
Last week Merrill Lynch & Co. bought a small stake in DiMaio Ahmad Capital LLC. The firm manages $1 billion in structure investments and $2 billion in hedge fund assets.
This trend began two years ago when JP Morgan Chase & Co. bought a majority stake in High bridge Capital Management, a firm estimated at $7 billion.
However, the Avenue Capital Group is only part of Morgan Stanley’s plan to boost its $448 million in managed assets to more than $600 billion in the next five years. In June Morgan Stanley bought Oxhead Management, worth $100 million in assets. And, after a stalled attempt, they have resumed talks with FrontPoint Partners, a hedge fund that manages $5 billion in assets.
Though an agreement has not been made, FrontPoint’s asking price fell from $1 billion to $300 million.