Less than a year ago Challenger Financial Services Group raised more than $260 million from a couple of optimistic, offshore, investors, one of whom paid what now looks like a fortune for nothing more than an option to buy shares in the company.Now Challenger is making plans to give some of it back, by buying its own shares at drastically lower prices.Challenger said it would launch a share buyback. The company will buy back up to 10 per cent of its issued capital through an on-market program.The company, in its announcement, tied the share buyback to receipt of proceeds from the sale of Genesys Wealth Advisers and Synergy Capital Management to AXA Asia Pacific for $150 million. However, another way of looking at Challenger's capital management is to recall the now extraordinarily ill-timed investments of The Bank of Tokyo-Mitsubishi and Colony Capital.In August 2007 The Bank of Tokyo-Mitsubishi and Mitsubishi UFJ Securities Co paid $208 million for 40 million shares in Challenger, at $5.20 a share.At the same time Colony Capital, a US investment firm, paid Challenger $64 million for an option to buy 57 million shares in the latter at $7 a share over five years.That investment would buy Colony a two per cent stake in Challenger today, but for its outlay it ended up with no shares and an out-of-the-money option.Challenger noted in the announcement of its new approach to capital management that it had a low debt position, a strong capital surplus and strong operating cash flows.It will also evaluate the buyback, to be conducted on market, against other investment opportunities.Last month's announcement of the sale of financial planning businesses prompted suggestions that Challenger may be looking to sell out of its other distribution business, mortgage aggregation. The group owns or has investments in three aggregators - Choice, Fast and Plan - and has an investment in the lender Homeloans.Tilley said that Challenger remained committed to the development of its aggregation business.At Friday's closing price of $2.05 a share, Challenger has a market capitalisation of $1.23 billion. A 10 per cent buyback would cost a little over $120 million. The stock rose to $2.16 yesterday.