The founders of one of London’s biggest and most successful hedge fund groups, Lansdowne Partners, are selling a minority stake in the business, netting an estimated $300 million (£157 million).

Morgan Stanley, clinching its third hedge fund acquisition in the space of three days yesterday, announced that it was buying 19 per cent of Lansdowne.

The deal will allow Paul Ruddock and Steven Heinz, the Lansdowne co-founders, to crystallise some of the colossal value built up in the business, which has mushroomed to $12 billion in funds under management in eight years.

Outside analysts estimated that Lansdowne, which has attracted about $6 billion of new investment in the past 12 months, could be worth more than $1.5 billion, so long as its talented team were suitably locked in for the long term.

The deal puts a value on Lansdowne shares, which will help the firm in attracting and retaining staff. It will also give the firm access to Morgan Stanley’s global distribution network and its technology.

For Morgan, which is the largest prime broker used by Lansdowne, it will help to cement that relationship and continue to build Morgan’s firepower in hedge funds, where John Mack, the chief executive, believes that the bank has fallen behind its competitors.

Stuart Bohart, the newly appointed head of alternative investments at Morgan Stanley Investment Management, said: “Lansdowne is consistently ranked as one of the best- performing and most respected hedge funds in the world.”

Mr Bohart has embarked on a spree this week, paying $300 million for a near-20 per cent stake in Avenue Capital Group, a New York-based hedge fund manager, on Monday, then up to $400 million for FrontPoint Partners, another hedge fund group, on Tuesday.

Lansdowne declined to comment yesterday. Mr Ruddock was reassuring investment clients and in a note assured them that most of the proceeds of the stake sale were being recyled into Lansdowne funds. The estimated deal price values Lansdowne at about 12½ per cent of funds under management, which compares with about 15 per cent for the Avenue deal and 13 per cent for the London-listed hedge fund manager RAB Capital.

Several other independent hedge fund groups are looking to sell minority stakes to investment banks, according to corporate financiers, allowing them to cash in some of their chips, while giving them access to their army of well-heeled clients.

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Firm's links go from No 10 to Old Trafford

The media-leery Lansdowne Partners is best known for making money from Manchester United, a penchant for Tesco shares and for a newly acquired link with Downing Street.

With $12 billion (£6.3 billion under management), the 16 partners and 79 employees invest client money across a wide range of strategies, including equity long-short funds and global macro funds.

It banked huge profits when it sold a 5 per cent stake in Manchester United in 2003, ahead of the bid from Malcolm Glazer, and at present holds a 2.7 per cent stake in Arsenal.

It has also accumulated a vast stake in Britain’s biggest supermarket group. The 122.6 million Tesco shares in its funds are worth more than £480 million.

Recently, the name of Arnab Banerji has appeared among its newest partners. Mr Banerji, a former fund manager at Foreign & Colonial, was until recently an economic adviser to Tony Blair.

Lansdowne, based in the heart of the Mayfair hedge fund ghetto between Berkeley Square and Grosvenor Square, was founded in 1998 by Paul Ruddock and Steven Heinz.

Mr Ruddock, 48, spent 14 years at Schroders, where he rose to be head of the international arm of Schroder Wertheim. Mr Heinz, 43, previously managed equities for Harvard Management Company. Before that he worked for the management consultants McKinsey and Co and for Goldman Sachs.

Another early joiner was Suzi Nutton, head of operations. Star recruits since then include William de Winton and Richard Davidson, both formerly with Morgan Stanley, and Stuart Roden and Peter Davies, who came from Merrill Lynch.

STARS WHO HEAD FOR THE HEDGE

Investment banks regularly lose their star traders to hedge funds. It is common practice for the banks to tap into future profits from the start-ups by acquiring a stake in them, or giving them hundreds of millions of dollars to trade.

JPMorgan: acquired stake in Highbridge Capital Management

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