Manulife buys CQS, ending an era for Michael Hintze

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Manulife is buying CQS, the British credit investor founded by Lord Michael Hintze, as the Canadian insurer and asset manager looks to gain a foothold in the fast-growing personal credit sector.

The deal announced Wednesday will transfer the brand, platform and $13.5 billion in assets under management to Canadian group CQS. CQS’s current chief executive, Soraya Chabarek, will continue to lead the business as it will be folded into Manulife’s investment management division, which has $746 billion in assets under management.

However, 70-year-old Hintze, a prominent Conservative Party donor and philanthropist, will retire from the company he founded in 1999. The flagship hedge fund he runs, Directional Opportunities, with assets of around $1.5 billion, will be spun off into a new firm that he will personally lead. Approximately $500 million to $600 million in assets not included in the flagship hedge fund will also remain with Hintze.

Terms of the deal were not disclosed but are not material to Manulife’s investment management business, which is particularly strong in North America and Asia. The global group has a sizeable alternative investments division but only a nascent personal lending business. The deal will also give Manulife significantly higher profile among institutional investors in the UK and Europe.

CQS’s assets have fallen from $21 billion in 2022 to $15.6 billion today after a difficult period of performance during the pandemic. Hintze’s flagship fund suffered a 34.8 percent loss due to structured credit bets that suffered losses in 2020.

The transaction is expected to close early next year, subject to regulatory approval.

Paul Lorentz, chief executive of Manulife Investment Management, said the group was not seeking major cost savings from the merger: “The real value of this is in the revenue synergies,” he said. “There are so many opportunities for growth.”

CQS operates a range of funds that trade instruments such as structured credit, convertible bonds, asset-backed securities and equities based on geopolitical, economic and market analysis.

The groups have been talking about a deal for nine months. “I think Manulife’s mantra was most attractive in our first meeting, which was to create and enable investment autonomy. That was important for us,” said Chabarek. “They spent a lot of time understanding what we do and how we do it.”

In recent years, CQS has repositioned itself from its pure hedge fund roots and expanded its long-only business, which now accounts for around 90 percent of assets under management and charges lower fees.

The departure gives Hintze the opportunity to focus on the strategy that made him famous. He is an advisor to the Duchy of Cornwall, the private estate of the Prince of Wales. In his honor, London’s Natural History Museum renamed its main entrance hall Hintze Hall.

Hintze was born in China to Russian émigrés and grew up in Sydney after his family left China when Mao Zedong and the Chinese Communist Party took power. A former captain in the Australian Army, he moved into finance, working at Salomon Brothers, Goldman Sachs and Credit Suisse First Boston. From there he founded the Convertible and Quantitative Strategies division as CQS in 1999.

“I am pleased that CQS has found the right partner in Manulife Investment Management,” he said.