Expect a flurry of asset management deals in the months ahead as banks and others take steps to raise capital, said Aaron Dorr, managing director at investment bank Jefferies Putnam Lovell.

"In the next 12 months, we expect strong M&A activity involving banks and other financial institutions divesting asset management businesses to raise capital," Dorr said.

Dorr's statement has possible implications for the fund industry as there are quite a few financial institutions out there with valuable asset management businesses including: Wachovia's Evergreen Investments, Bank of America's Columbia Management and Morgan Stanley's Van Kampen Investments.

Jefferies Putnam Lovell on Tuesday released M&A numbers during the first half of the year. And as industry insiders no doubt already guessed, activity was down during the period. In the first half of 2008, there were 102 deals in the global asset management industry, compared with 115 in the first half of 2007.

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Company Press Release

NEW YORK, July 1, 2008 – Sales of alternative investment firms totaled a record 37% of all deals in the global investment management business in the first half of 2008, reflecting significant ongoing asset flows directed to the alternatives sector, according to Jefferies Putnam Lovell, the division of Jefferies Group, Inc. (NYSE: JEF) focused on the asset management and financial technology industries.

While the total for alternatives deals climbed from the year-earlier period – 38 of 102, compared with 35 of 115 in the first half of 2007 – overall global asset management M&A activity declined amid the worldwide credit crisis and equity market slide, according to preliminary data from New York-based Jefferies Putnam Lovell. Total disclosed deal value in the first half 2008 slumped to $10.6 billion, from $36.9 billion a year earlier, while the total amount of assets under management transacted fell to $904 billion from $1.23 trillion.

‘’Potential buyers and sellers are in the midst of a strategic overhaul as they gauge the severity and duration of the global financial slump,’’ said Aaron Dorr, a New York-based Managing Director at Jefferies Putnam Lovell. ‘’In the next 12 months, we expect strong M&A activity involving battered banks and other financial institutions divesting asset management businesses to raise capital, and continued record demand for alternatives.’’

Highlights from asset management M&A activity in the first half of 2008 include:

Ping An Insurance’s announced acquisition to purchase 50% of Fortis Investments for approximately $3.4 billion. It is the largest transaction by disclosed deal value in 2008 and also by acquired assets under management, as Fortis managed approximately $386 billion at the time of the announcement.

The proposed private equity-backed management buyout of American Beacon Advisors from American Airlines parent AMR Corp. for approximately $480 million.

Royal Bank of Canada’s announced purchase of Phillips, Hager & North Investment Management for approximately $1.3 billion.

Blackstone Group’s purchase of multl-strategy hedge fund manager GSO Capital Partners, one of a record number of transactions involving firms in alternatives sector.

Jefferies Putnam Lovell will publish a comprehensive review of first half 2008 asset management M&A activity later in July.

About Jefferies Putnam Lovell

Putnam Lovell, the division of Jefferies & Company, Inc. focused on the financial services industry, offers a wide range of corporate advisory services, including mergers and acquisitions advice and capital raising. Putnam Lovell’s global client base is comprised of diversified financial services firms, institutional and mutual fund managers, alternative investment managers, banks, broker-dealers, insurers, and financial technology firms. Putnam Lovell was founded in 1987 and operates from offices in New York, San Francisco, Boston, and London. Since July 2007, Putnam Lovell has been a division of Jefferies & Company, Inc., the principal operating subsidiary of Jefferies Group, Inc. (NYSE: JEF). For more information please visit www.putnamlovell.com

About Jefferies

Jefferies, a global investment bank and institutional securities firm, has served growing and mid-sized companies and their investors for 45 years. Headquartered in New York, with more than 25 offices around the world, Jefferies provides clients with capital markets and financial advisory services, institutional brokerage, securities research and asset management. The firm is a leading provider of trade execution in equity, high yield, convertible and international securities for institutional investors and high net worth individuals. Jefferies & Company, Inc. is the principal operating subsidiary of Jefferies Group, Inc. (NYSE: JEF; www.jefferies.com) 

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