New Blackstone Fund To Buy Hedge Fund Stakes On Secondary Market

Oct 24 2012 | 12:56pm ET

The Blackstone Group will launch a fund of hedge fund managers with as much as $3 billion, seeking to take advantage of the Volcker rule's limits on banks' ownership of the same.

The new private equity fund would buy stakes in hedge fund firms on the secondary market. That could soon be a busy place, as banks seek to offload the ownership interests they've taken in hedge fund general partnerships in recent years. The Volcker rule strictly limits such investments. In addition, some investors in hedge fund firms have seen the value of their stakes fall as the industry has hit upon hard times and mediocre returns.

Blackstone hopes the new fund could make in excess of 20% per year.

Blackstone plans to begin marketing the new vehicle shortly, and hopes to raise between $2 billion and $3 billion, although no formal target has been set, Reuters reports.

The New York-based alternative investments giant indicated last week that it had something up its sleeve. "We have a fund that seeds new hedge fund managers, and by doing that owns a piece of the GP, and we have a new product that we are working on, which we will be announcing shortly but haven't announced yet," Tony James, Blackstone's president, told analysts.


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