Morgan Stanley Hedge Fund Spin-Off Wins $500M From Blackstone

Oct 10 2012 | 1:39pm ET

A Morgan Stanley proprietary-trading desk being spun-off as a hedge fund later this year has raised more than $500 million from the Blackstone Group—without giving up a piece of itself.

PDT Partners launched its first fund in June and will fully split from Morgan Stanley by the end of the year, as the bank moves to comply with the Volcker rule, which strictly limits banks' investments in hedge funds. The New York-based firm plans to launch a second fund with about $1.5 billion in January, Bloomberg News reports.

Investors appear to be willing to make some pretty big concessions to get their money into the former process-driven trading desk, led by Peter Muller. Blackstone ponied up its half-billion without demanding a stake in the new firm, as it usually does for such large investments. And Muller has reportedly ruled out fee discounts and imposed a seven-year lockup on some of the $2 billion raised, virtually unheard of provisions in the current hedge fund environment.

PDT has returned an average of 20% a year since its debut in 1993.

Morgan Stanley owns a stake in PDT, less than 5%, although it is unclear whether it will hold on to it; PDT has acquired some Morgan Stanley assets as part of the spin-off. The rest of the firm is owned by its 11 partners, although Muller himself owns a majority stake.

PDT has 100 employees, including CFO Brian Thomas and chief compliance officer Ajay Salhotra.

In Depth

Related-Company Fees: Normal Industry Practice or Conflicted Compensation?

Nov 11 2015 | 4:23pm ET

Regulatory agencies as well as investors are increasingly exploring whether certain...


Ferrari Roars in Wall Street Debut

Oct 21 2015 | 4:28pm ET

Shares of supercar maker Ferrari jumped as much as 15 percent to a high of nearly...

Guest Contributor

Private Debt - What is the Opportunity?

Nov 11 2015 | 3:28pm ET

In this contributed article, Rob Allard, founding partner of Firebreak Capital...


Editor's Note

    Oct 21 2015 | 10:41am ET

    One of the most unique charity benefits in the hedge fund industry, A Leg To Stand On's (ALTSO's) Hedge Fund Rocktoberfest - NYC, raised nearly $500,000 last Thursday thanks to the generous support of major sponsors and nearly 1,400 attendees from the Tri-State finance, business and hedge fund communities. Read more…