(Bloomberg) -- The Abu Dhabi Investment Authority is buying a minority stake in a Canadian platform that makes it easier to allocate capital to multiple hedge funds.
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A subsidiary of the $1 trillion sovereign wealth fund will progressively raise its exposure in Innocap Investment Management Inc. to 10% in the coming years, according to a statement on Tuesday. At that point, Mohammed Sghayer Khalaf Al Qubaisi, deputy director of the fund’s alternative investments department, will join the Innocap board. Financial details of the transaction weren’t disclosed.
ADIA, as the state-backed investor is known, is working with a wider range of hedge funds today than previously, Bloomberg News has reported. Its equities department now has different and higher return targets, and is working with managers offering equity and equity-related long-only, long-short, quant and market-neutral strategies.
Innocap runs the so-called managed accounts platform, a mechanism that allows investors to funnel money into a range of funds with full transparency and control of those money pools, as well as relatively lower fees.
The sovereign investor has picked Innocap to provide such services for parts of its hedge fund and equity exposures, the statement said.
The business is booming as large investors and multistrategy hedge funds use them as a gateway to fork out cash to external traders. Investors have allocated about $83 billion across 340 funds through Innocap’s platform, according to its website.
“Innocap’s shareholders recognize a clear shift in the industry towards dedicated managed accounts which is notably driven by institutional allocators’ commitment to their fiduciary duty,” the firm said in the statement.
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Managed accounts, which gained popularity after the financial crisis as a way to avoid getting locked into hard-to-sell assets by giving clients transparency and control over trading, are evolving into a preferred route to quickly deploy capital in existing firms as well as hedge fund startups.
About a tenth of Millennium Management’s more than 330 teams that deploy its $72 billion in capital are external managers running its cash through a managed account, Bloomberg News has reported.
Innocap, whose shareholders include its senior management, Caisse de Depot et Placement du Quebec, Bank of New York Mellon Corp., Walter Global Asset Management and BNP Paribas SA, also plans to open an office in Abu Dhabi this year.