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Blackstone to rationalise single manager hedge funds businesses

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The Blackstone Group is making changes to the single manager hedge funds businesses within its alternative asset management segment, including consolidating its distressed securities fu

The Blackstone Group is making changes to the single manager hedge funds businesses within its alternative asset management segment, including consolidating its distressed securities fund onto a single operating platform with its GSO credit investment business.

Investors in the Blackstone Distressed Securities Fund will be offered the opportunity to transfer their capital on preferred terms to distressed strategies managed by GSO and the existing fund will be liquidated.

Blackstone Kailix Advisors, the investment manager of Blackstone’s long/short equities fund, will be spun off to its management team led by Manish Mittal, who intends to form a new fund as an independent entity.

Blackstone will be an investor in the new fund and investors in the existing fund will be offered the option of investing in the new fund on a preferred basis as their interests in the existing fund are liquidated.

The company says that although the existing fund has outperformed global equities measures, its size does not make it a core strategic business for Blackstone and it is not anticipated that this will change in the near term. The fund has not imposed any gates or liquidity restrictions on investors.

Tony James, president and chief operating officer of Blackstone (photo), says: ‘We believe these measures will enable us to operate more profitably in the current environment. Although these funds have performed better than the S&P 500 and other global market averages, we expect that adverse fundraising conditions in the hedge fund industry will prevent these two initiatives from scaling up to a size where they are meaningful for our business on a standalone basis.

‘We continue to have a significant commitment to the hedge fund business. The current market turmoil with its associated dislocation of asset prices presents us with a multitude of compelling opportunities to invest capital. It is during times like these that we need to be especially disciplined to focus both our people and our capital on the largest opportunities.’

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