Blackstone Said To Raise $1.5B To Seed New Hedge Funds

Feb 9 2017 | 9:27pm ET

Global alternative asset manager Blackstone Group has reportedly amassed a $1.5 billion war chest aimed at seeding startup hedge funds despite widespread concerns about returns, fees and a shrinking number of managers. 

The total brings to approximately $5 billion raised since 2007 by Blackstone for the startup strategy, according to a Bloomberg article citing unidentified individuals with knowledge of the matter. The latest vehicle being used for the strategy is Blackstone’s Strategic Alliance Fund III, which sits within the company’s Blacksone Alternative Asset Management unit and was launched after the company's second seed-stage fund raised $2.4 billion in 2011.

The number of hedge funds has been declining in recent years, as the industry struggles with consistently generating marking-beating returns and justifying high fees to institutional investors like pension plans. The approximately 8,500 hedge funds tallied in 2015 had declined to about 8,300 by the end of last year, according to Hedge Fund Research data cited in the Bloomberg article.

Blackstone’s hedge fund business manages more than $71 billion, the Bloomberg article said, and runs the $3.3 billion Strategic Capital Holdings fund in addition to seeding new managers. Strategic Capital Holdings buys equity stakes in hedge fund managers and holds minority positions in Marathon Asset Management, Magnetar Capital Partners, and Solus Alternative Asset Management, among others. 

The news comes less than two months after Blacksone shuttered its in-house $1.8 billion Senfina Advisors multi-manager/multi-strategy hedge fund unit following steep losses in 2016. 

Founded in 1985 by Steven Schwartzman and Peter Petersen, Blackstone is the world’s largest alternative asset manager, active in global hedge funds, private equity, real estate, public debt and equity, non-investment grade credit, real assets and secondary funds. The firm managed $367 billion in assets as of December 31, 2016. 

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