(Bloomberg) -- Manulife Investment Management is buying most of billionaire Michael Hintze’s CQS in a bid to expand the Canadian investment firm’s specialized fixed-income investment strategies.

The Manulife Financial Corp. unit is acquiring the CQS credit platform, which has about $13.5 billion of assets under management, and the CQS brand, one of the best-known names in alternative investing, according to a statement. The transaction is expected to be completed in early 2024, and financial terms weren’t disclosed. 

“CQS’s capabilities are a complement to our existing fixed income and multi-asset solutions business and a powerful addition to our global credit offering,” Manulife Investment Management Chief Executive Officer Paul Lorentz said in the statement. The unit has about C$845 billion ($618 billion) of assets under management.

“In Manulife Investment Management we have found the optimal long-term partner,” said Soraya Chabarek, the CEO of London-based CQS. “We have transformed CQS into a global alternative credit platform and this transaction is an exciting and important strategic step forward for our business, our clients, and our employees.”

Read More: CQS Said to Weigh Selling Parts of $15 Billion Fund Business

CQS has managed research-driven alternative credit strategies for more than two decades, including corporate credit, asset backed securities, collateralized loan obligations, convertible bonds and structured credit. 

The acquisition is the latest in a wave of deals in the asset-management industry as large, traditional firms seek to expand into alternatives by buying more boutique firms. The deal is an opportunity for the firm to offer more fixed income exposure to retail, retirement and institutional clients as rates rise and investors seek more sophisticated variations on the asset class, Luke Shane, a spokesman for Manulife Investment Management, said in an email.

CQS has returned to its credit-investing roots after a challenging few years. After posting steep losses in some of its funds in 2020, it shuttered at least two money pools, scuttled an expansion plan, spun off non-core strategies and cut jobs. Assets have declined from a peak of almost $20 billion before the losses. 

Hintze’s flagship Directional Opportunities fund and certain related mandates are not included in the transaction. The founder will form his own firm under which he will continue to manage his fund, according to the statement.

Hintze, a former Australian army captain, started trading Yankee bonds for Salomon Brothers in 1982 and joined Goldman Sachs Group Inc. two years later, but he quit after he wasn’t made a partner. Brady Dougan, the former CEO of Credit Suisse, hired him and later gave Hintze $200 million to start his own hedge fund in 1999. Five years later, Hintze returned $500 million to Credit Suisse and took full control of CQS.  

The Directional Opportunities fund gained 6.2% this year through September, and has returned an annualized 10.8% since its 2005 inception, according to a letter to investors.

Job Cuts

Manulife Financial said third-quarter core earnings climbed 28% to C$1.74 billion, or 92 cents a share, beating the 83-cent average estimate of analysts surveyed by Bloomberg. Earnings were boosted by its business in Asia, where insurance sales in Hong Kong to mainland Chinese visitors continue to improve after the loosening of pandemic travel restrictions.

Still, the company is preparing to reduce headcount. Manulife said Tuesday that it will cut 250 jobs in its wealth and asset management unit, reducing staff at offices in the US, Canada, the UK and Asia.

“Like every other asset manager, we are weathering sustained market volatility and, for the first time in 15 years, a market cycle of higher-for-longer interest rates,” Lorentz said in a memo to employees.

--With assistance from Nishant Kumar, Nabila Ahmed and Peter Eichenbaum.

(Adds additional quote from CQS CEO in fourth paragraph and more details throughout.)

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