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BNY Mellon to Expand Hedge Fund Biz

Zacks Equity Research

The Bank of New York Mellon Corporation (BK) recently entered into an agreement with HedgeMark International, LLC to acquire 65% ownership stake in the latter. The remaining 35% stake is already held by the company since 2011.

The deal is expected to close in the second quarter of 2014. However, it is still subject to regulatory approval.

Now, what prompted BNY Mellon to buy the additional stake?

The market scenario is currently witnessing the shift of institutional clients’ preference from conventional modes of investment to alternative arenas. Investors are now willing to take calculated risk to maximize their return.

As an alternative investment solution, hedge funds are gaining popularity as they allow investors to hedge risks and yield comparatively higher. Moreover, these funds are largely unregulated, as clients of net worth more than $1 million with considerable investment knowledge are allowed to deal with these.  

HedgeMark International specializes in hedge funds and offers services related to structuring, oversight and risk monitoring of hedge funds. Hence, once the acquisition is completed, the acquired units will complement BNY Mellon’s hedge fund business and consequently improve profitability in the long run. Moreover, HedgeMark International’s expertise will enable BNY Mellon to deliver enhanced services and better risk management to its clients.

BNY Mellon’s stock price movement following the news release depicted a positive market response. The shares closed at $31.80 on Feb 24, up 1.4% from the previous day.

BNY Mellon currently carries a Zacks Rank #3 (Hold). Some better-ranked major regional banks include BB&T Corporation (BBT), Fifth Third Bancorp (FITB) and The PNC Financial Services Group, Inc. (PNC). All these stocks have a Zacks Rank #2 (Buy).

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