Blackstone Buys Minority Stake in Magnetar Capital

May 15 2015 | 9:16am ET

Blackstone has expanded its relationship with hedge fund Magnetar Capital, buying a minority stake in the investment manager through its Strategic Capital Holdings fund.  

The deal is the third such acquisition for the $3 billion private equity vehicle, which aims to buy minority stakes in alternative asset managers. It previously bought ownership positions from Solus Alternative Asset Management and Senator Investment Group and typically takes stakes of 20-30%, according to a Wall Street Journal report. 

Terms of the deal were not disclosed, although it reportedly places a multibillion-dollar valuation on Magnetar. Blackstone, whose Alternative Asset Management division is the world’s largest investor in hedge funds, has been an existing investor in Magnetar since shortly after Magnetar’s inception ten years ago.

Magnetar came into the spotlight during the financial crisis, when mortgage CDOs it helped create with a number of Wall Street institutions collapsed. Although Magnetar profited from bets it made that the value of some of those CDOs would fall, the SEC ultimately accepted Magnetar’s assertions that it had not controlled security selection for the pools in which it invested and was not short the overall housing market.

The regulator recommended against filing charges against the fund following an investigation that concluded in 2013. 

Magnetar, which makes primarily event-driven, debt and energy investments, was founded in 2005 by former Citadel executives Alec Litowitz and Ross Laser. It has more than $13.5 billion in assets under management. 

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