Hedge funds drawn to Tony Hayward's Vallares



Hedge funds and sovereign wealth funds snapped up as much as 20pc of Vallares's £1.35bn share offering, The Sunday Telegraph has learnt.

In a development that appears to be at odds with Vallares's assertion that UK and US long-only fund managers provided the vast majority of the demand, a significant number of hedge funds invested in the oil-and-gas shell vehiclefounded by a quartet that takes in former BP chief executive Tony Hayward and financier Nat Rothschild.

Although the exact reason the hedge fund community has been so attracted to Vallares which has given itself two years to find an emerging market asset which could transform the company into one worth as much as $10bn (£6.2bn) is unclear, it is clear that the presence of the hedge funds could provide the founders with a testing time should they fail to deliver on their promises.

Third Point, the $7.2bn New York (Xetra: A0DKRK - news) hedge fund run by Dan Loeb, is understood to be one of the largest hedge funds on the register.

Mr Loeb is known in the financial world for criticising companies he invests in through public letters, and he likes to invest in companies undergoing mergers, bankruptcies or some form of restructuring.

Others with a sizeable investment in Vallares include Marshall Wace, the £4bn London-based fund founded and run by Paul Marshall and Ian Wace, which has become one of the most prominent hedge funds in the UK and Europe (Chicago Options: ^REURTRUSD - news) .

In addition, London-based Lansdowne Partners and Och-Ziff and Paulson & Co. both headquartered in New York are understood to have taken positions.

As well as hedge funds, a number of sovereign wealth funds led by Mubadala, the Abu Dhabi-owned sovereign wealth fund has investments in advanced technology firms as well as energy investments and property.

In total, there are believed to be some 150 institutions of various sizes on the shareholder register, which will not become available in full until next month.

One of the largest single investors is understood to be Schroders (Berlin: PYX.BE - news) , the London-based fund manager, with other long-only traditional funds including Fidelity and Wellington also on the list.

In addition, it is known that more than 50pc of the register's investors come from the US, a strong backing for Mr Hayward following last year's Deepwater Horizon (Euronext: HOR.NX - news) explosion and subsequent oil spill and the highly political aftermath which branded him the "most hated man and most clueless in America" for a time.

One source close to the situation suggested the hedge funds may have been attracted to Vallares due to the way in which the four founders banker Julian Metherell and entrepreneur Tom Daniels are the other two are being potentially remunerated.

The four have invested £100m between them, the first £20m of which will be forfeited if they cannot find an asset that is acceptable to the company's board, chaired by Rodney Chase, within two years.

The £20m is however part of a lucrative compensation scheme that could see the quartet share as much as £410m if they are able to turn Vallares into a $10bn company.

The scheme is understood to have been likened by some investors in the placing process to similar schemes within hedge funds, given the founders are putting their own money on the line. Another source pointed to the fact that long-only investors were drawn to the Vallares placing because they are able share in the upside benefit without having to take as many risks.

Conditional trading in Vallares's shares began on Friday, at £10 each. But the shares fell 1pc to close at 990p by the end of trading. Unconditional trading begins on Wednesday.

A spokesman for Vallares declined to comment.

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