Mediobanca’s Cairn Buys Blackstone-Backed Hedge Fund Bybrook

Mediobanca SpA’s credit fund Cairn Capital has agreed to buy Bybrook Capital, a distressed debt fund backed by Blackstone Group Inc., to expand its offering of alternative investments.

The acquisition, set to complete by the end of June, will add about $2.5 billion in assets under management, taking Cairn to more than $8 billion, Chief Executive Officer Nicholas Chalmers said in a phone interview. He did not disclose the value of the deal.

The deal fits with the Italian bank’s strategy to expand in asset management in order to maintain higher margins compared with its larger domestic rivals. After buying Bybrook, Mediobanca will manage about $10 billion in alternative assets.

“In welcoming Bybrook, we will broaden its investor appeal, raise new capabilities and achieve positive synergies,” Mediobanca’s Chief Executive Officer Alberto Nagel said in a statement Tuesday.

The tie-up is a rare example of consolidation in the non-traditional asset management industry, which signals a drive to gain complementary expertise as money managers try to improve returns.

Investors are looking for managers who can provide different solutions through the cycle, including distressed, said Chalmers. “This is a transaction driven by synergies on the investment side and not a desire for additional scale,” he said.

London-based Bybrook was founded by Robert Dafforn in 2014, with private equity giant Blackstone investing $150 million of seed capital. Its flagship fund returned more than 15% net of fees last year, a spokesman said.

Read more: Blackstone-Backed Hedge Fund Sees Record Gain on Distressed Bets

The firm is now preparing for a new wave of defaults. Misallocation of capital by European governments and low growth are “sowing the seeds” for the next wave of distressed debt, Dafforn said in a phone interview.

Bybrook’s shareholders will take a minority stake in Cairn, with Mediobanca remaining the controlling shareholder with 64%, according to the statement.

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