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Michael Spencer invests $40m in Europe-focused hedge fund

Hedge funds

Michael Spencer invests $40m in Europe-focused hedge fund

Nex Group chief and ICAP founder sees ‘real opportunity’ in start-up Viewforth

Michael Spencer, chief executive of Nex Group, is backing a hedge fund start-up in London with an investment of about $40m made through his private investment group, according to a person familiar with his plans.

The hedge fund, Viewforth Investment Partners*, is being launched by Richard Black, a co-founder of Abberton Capital, another London-based hedge fund. It will aim to capitalise on mispricings of mid-cap securities in Europe by betting on which stocks will rise and fall.

Mr Spencer confirmed he was committing funds to Viewforth for at least four years but declined to say how much.

He said he had “worked in financial markets for more than 40 years and am seeing mid-sized companies in Europe becoming increasingly mispriced because of structural market changes”.

“This is a real opportunity for investors like Viewforth who think independently and concentrate capital in the most mispriced opportunities,” Mr Spencer said.

$500m

Target that Viewforth aims to raise

Mid-cap companies in the UK have suffered a drop in liquidity while their analyst coverage has shrunk because of new European market rules around research distribution, known as Mifid II.

The rules require banks to charge fund managers for research, prompting many asset managers to reduce the amount of content they receive. Banks have responded by cutting their research capabilities, with small- and mid-cap companies in particular receiving less scrutiny.

The Viewforth fund, which is set to launch in the fourth quarter of this year, aims to raise about $500m. It plans to hold long positions for two to four years, and short positions for one to two years, and to target consumer goods and retail, business services, industrials, TMT and financial services companies.

Mr Spencer is best known for founding the interdealer broker ICAP, part of which was sold to Tullett Prebon in 2016. The rest was rebranded as Nex, and is in the process of being sold to CME Group for £3.9bn.

Through his personal investment fund IPGL, Mr Spencer has invested heavily in hedge funds and other business start-ups. Most recently he invested $14.2m in Veridium, a cyber security fintech start-up.

Overall, hedge funds’ performance this year has been lacklustre. Hedge Fund Research’s index of returns across all strategies was up 1.5 per cent in the year to July, as macro and quantitative funds’ returns weighed down performance.

Yet investors recently surveyed by Credit Suisse showed a positive swing in demand for hedge funds, in preference to strategies including private equity, venture capital, infrastructure, cash, real estate and commodities. Of the 279 institutional investors surveyed, 93 per cent said they expected to increase or maintain their exposure to hedge funds.

Hedge fund launches outpaced the number of firms that shut down in the first quarter, but the number of start-ups, 158, was one of the lowest levels since the financial crisis.

More investors are targeting hedge funds that are just starting out, after several studies showed that funds outperform in their early years.

Paamco Prisma, a $30bn fund-of-funds, said in June it would start Paamco Launchpad, a seeding platform to invest in hedge fund start-ups, while Louis Bacon, the founder of Moore Capital, has seeded his former protégé Greg Coffey’s hedge fund start-up.

*This article has been amended to correct the name of the fund

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