Alternatives IPO bandwagon is rolling

Possible tax hikes and stagnant stock price movement aside, hedge funds and private-equity funds continue to beat a path to the public markets.

Possible tax hikes and stagnant stock price movement aside, hedge funds and private-equity funds continue to beat a path to the public markets.
Last week, New York-based Kohlberg Kravis Roberts & Co. became the latest 800-pound gorilla to climb on board the initial public offering bandwagon while hoping to raise a mere $1.25 billion.
KKR will be joined on the public market by New York-based hedge fund Och-Ziff Capital Management Group LLC, which expects to raise as much as $2 billion.
On deck, Wall Street believes, are Greenwich, Conn.-based AQR Capital Management, one of the world’s largest hedge fund groups, and Chicago-based Citadel Investment Group LLC.
Why do the IPOs keep coming? “
[This] may be a market top. These people are enjoying significant cash flows that are unsustainable, and they know that,” Michael Napoli, head of Los Angeles-based hedge fund advisory firm Absolute Return Group, told The Wall Street Journal.
The KKR offering has been particularly eyebrow raising, allowing outsiders a rare glimpse inside the secretive firm, which said it made an annual return of 20% after fees.
With $53.4 billion in assets under management, KKR appears to be valued at approximately $25 billion.

Red star rising
For all the attention paid to the hedge and private-equity IPOs, guess who is set to become the world leader in share offerings this year?
It’s China, which, according to a report by New York-based PricewaterhouseCoopers LLP, is on track to spawn more than $52 billion worth of new issues in 2007.
The IPO frenzy is being driven by the roaring bull otherwise known as the Chinese stock market, which has more than doubled in value in the past 12 months, and by the companies that, understandably, want to benefit from their soaring valuations.
To date, only New York-based Goldman Sachs & Co. Inc. and Zurich, Switzerland-based UBS AG have agreements with the Chinese government to participate in the IPOs, but scores of lobbyists are working overtime in Beijing to get other foreign firms a cut of the action.

Subprime bear
Not all markets can go up, of course, as The Bear Stearns Cos. Inc. of New York has painfully been reminded.
The collapse of the subprime-loan market over the past few months torpedoed two of the Wall Street firm’s big internal hedge funds, the High-Grade Structured Credit Strategies Fund and the High-Grade Structured Credit Strategies Enhanced Leverage Fund (got that?).
To make matters worse, it looks as if investors won’t know the extent of their losses until next week, according to published reports.
Last week, Bear Stearns took steps to impose greater risk controls on its $60 billion money management division, hiring Wall Street veteran Jeffrey Lane to run the unit.
He will work closely with the company’s chief risk officer, Michael Alix.

ETF bull
The Nasdaq Stock Market Inc. wants an even bigger piece of the explosive exchange traded fund market.
The New York-based company, which already controls more than 50% of ETF trading volume in the United States, last week announced that it will introduce the Nasdaq ETF Market, designed specifically for ETFs and index-linked notes, by the end of the third quarter.
“We wanted to innovate and create a market structure that will make our listings as competitive as our trading,” William O’Brien, senior vice president of Nasdaq, told Financial News.