Franklin angles into alts with major acquisition

Acquisition expands retail-focused shop's push into alts

By Jeff Benjamin

Nov 1, 2012 @ 10:53 am (Updated 3:12 pm) EST

alternatives, hedge funds, fund of funds
(Bloomberg)

Less than two months after announcing the deal, Franklin Resources Inc. Ticker:(BEN) has completed its majority-stake purchase of K2 Advisors Holdings LLC, a $9.3 billion fund-of-hedge-funds firm.

According to a statement today, K2 will use the proceeds of the sale to purchase all of the equity currently held by private-equity firm TA Associates Management LP and to retire all of K2's debt obligations.

TA Associates bought a minority stake in K2 in 2007 when K2 had $5.5 billion under management.

Franklin Resources, which operates as Franklin Templeton Investments and is known mostly as a retail-oriented $749 billion mutual fund company, plans to acquire the remainder of K2 over a multiyear period.

The K2 deal, exact terms of which were not disclosed, is the latest example of Franklin's migration into the alternatives space. Two years ago, the company acquired a 20% ownership stake in the alternatives shop Pelagos Capital Management LLC.

“The continued development of our alternatives platform has been a core strategic initiative for Franklin Templeton, and to that end, we are focused on creating new investment strategies and broadening our distribution capabilities across multiple channels,” said William Yun, executive vice president of Franklin Templeton alternative strategies.

Founded in 1994 and based in Stamford, Conn., K2 is one of the nation's largest fund of hedge fund firms, managing money primarily for institutional clients.

The deal with Franklin put to rest months of speculation about a suitor for K2. As recently as June, it was reported that K2 was in talks with The Carlyle Group, a private-equity shop.