Blackstone Plans Huge Concentrated Stock Hedge Fund

Jun 30 2014 | 9:56am ET

The Blackstone Group plans to launch a “best-ideas” hedge fund deploying billions of dollars on large, concentrated investments.

The new fund will employ several trading teams, employing a variety of strategies and making outsized bets on stocks at a time when many hedge funds are avoiding such concentrated holdings. The fund will then be marketed to high-net worth clients, The Wall Street Journal reports.

Blackstone is interviewing proprietary traders forced out of banks by new regulations, as well as current hedge fund traders who have ambitions to found their own firms. The alternative investments giant will give them just that chance: Rather than hiring them as Blackstone employees, traders will be grouped into independent management companies, each given as much as $500 million to seed their strategies.

The fund is expected to debut as soon as the fall and to manage several billion dollars before the end of the year.

The move is Blackstone’s latest effort to build a long/short equity hedge fund internally; two previous attempts failed during the financial crisis. If successful, the new fund would give Blackstone a presence to place alongside its fund of hedge funds business, already the biggest in the world, and its credit hedge-fund business, GSO Capital Partners.

The new project is led by J. Tomlinson Hill, who heads Blackstone Alternative Asset Management, as well as Parag Pande, the former Ziff Brothers Investments trader who now runs research at Blackstone’s fund of funds group, and Gideon Berger, BAAM’s risk chief. The three will form something of a committee to hear the new trading teams pitch their best ideas; those selected will be used in other firm products and will win the groups extra money to play with.

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