LONDON Hedge fund manager Man Group (EMG.L) is selling off its legal claims to the estates of defunct U.S. investment bank Lehman Brothers in a $456 million deal that will boost its net cash position and capture attractive gains for investors.
Hutchinson Investors, managed by the Baupost Group, has agreed to buy the portfolio at a 32 percent premium to the June 30 valuation and Man may receive a further $5 million if future recoveries from the claims exceed certain thresholds.
Man originally acquired the claims in July 2011 from funds managed by its GLG Partners subsidiary for $355 million.
GLG was one of hundreds of hedge fund and asset managers who had struck trades with Lehman that collapsed when the bank faltered in 2008.
Besides sparing GLG's investors uncertainty and possible loss while lawyers pursued compensation, Man spotted an opportunity to potentially profit from a burgeoning secondary market in the legal exposures as investors took bets on the likelihood that claims would be paid out, and by how much.
The sale follows a challenging period for Man Group, which has seen clients withdraw their cash in droves after poor returns from its flagship AHL fund.
In October, the former FTSE 100 group posted a fifth consecutive quarter of outflows.
In an effort to reverse its fortunes, the company has made a raft of changes: slashing costs, launching new funds and naming Jonathan Sorrell, son of WPP CEO Martin Sorrell, as finance director.
Shares, which have fallen almost three-quarters since the start of 2011, were trading 1.3 percent up at 74.7 pence by 0844 GMT.
(Additional reporting by Rhys Jones; Editing by Sarah Young and David Cowell)