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XL Capital, a Bermuda-based insurance, reinsurance, and financial products firm, by 1999 had acquired a minority interest in MKP Capital Management, Highfields Capital Management, and Pareto Partners. In July 2000, they bought a minority stake in Agora Capital Management.

Other examples include Capital Z, a venture capital firm. Since 1998, it has raised $1.5 billion for alternative investments. Capital Z has backed five hedge funds and 11 private equity funds. The hedge funds include Galtere and Quattro Investors. Capital Z takes an equity stake ranging from 20 to 50 percent, investing between $20 million and $50 million.

Value Asset Management bought 70 percent of Grosvenor Capital in 1998. Consolidated Advisors, controlled by Imperial Bank of Wood Gundy, took a minority interest in KD Partners (Kellner-DiLeo) in June 1997.

In mid-2000, a number of acquisitions occurred in the fund of funds sector, again reflecting a variation on the exit strategy. Bank of New York had signed an agreement to buy Ivy Asset Management, a fund of funds with $2.4 billion in assets. Bank of New York attributed the deal to requests from high-net-worth and institutional clients who wanted to invest in alternative investments and hedge funds.

On August 31, 2000, Switzerland-based ED&F Man purchased Glenwood Investments, a fund of funds in Chicago. Glenwood had $570 million in U.S. assets and another $850 million in products created for its joint venture Man-Glenwood. Man paid $110 million in cash.

Halcyon/Alan B. Slifka Management Co. formed a joint venture company with Baker Nye Advisors called Halcyon Capital Management, which will oversee assets of $2 billion. Motivations were to boost distribution channels and develop product lines. A large share of Halcyon's offshore business had been from institutions, but the U.S. hedge fund has been dominated by high-net-worth investors. In the joint venture, Halcyon will provide consulting and research services to Baker Nye.

BLACK EYES

There have been several debacles in the past few years that have put hedge funds in a bad light. In order, from most recent to oldest, they are as follows.