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5 Dec 2006

Hedge Funds in Stock

Brookville Capital Management, a 4 year old hedge fund with less than ten employees and about $221 million in assets under management, has been bought by Morgan Stanley.

Morgan Stanley has already acquired a large stock of hedge funds, in late October the giant agreed to buy FrontPoint Partners, a hedge fund with about $5.5 billion, for about $400 million. Last month said it would buy a minority stake in Avenue Capital Group, which oversees about $12 billion of distressed debt investments, and in Landsdowne Partners. John Mack, Morgan Stanley’s chief executive, has assembleed these hedge funds to help the firm catch up with rivals like Goldman Sachs in offering clients alternative investments.

The company said in a memorandum that the expansion is part of Morgan Stanley's aggressive push to catch up with rivals in providing hedge funds and other alternatives to traditional money management products such as mutual funds. The price of the acquisition was not disclosed in the memo.

Brookville is based in New York and was formed in August 2002 by former Bankers Trust New York Corp. traders David Reiss, Jacob Gulkowitz and Abraham Gulkowitz. The hedge fund specializes in what is known as credit arbitrage, taking long and short positions in companies whose stock prices are driven by takeover speculation and other "event-driven" opportunities, the memo said.

The memo was signed by Owen Thomas, president of Morgan Stanley's asset management division, along with alternatives investment chief Stu Bohart and the group's strategic acquisitions and absolute return strategies head, Yie-Hsin Hung.

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