According to the announcement, the firm plans to consolidate the Blackstone Distressed Securities fund with GSO Capital Partners, a hedge fund manager it acquired in March for $10 billion. Current investors in the fund can transfer their capital on preferred terms to the fund managed by GSO and the existing fund will be liquidated.
Blackstone also plans to spin off Blackstone Kailix advisers, the investment manager of its long/short equities fund, to a management team led by Manish Mittal, who plans to form a new fund as an independent entity, the announcement said. Blackstone will invest in the new fund, and investors in the existing fund will be offered the option of investing in the new fund on a preferred basis as their interests in the existing fund are liquidated.
“We believe these measures will enable us to operate more profitably in the current environment,” Blackstone Chief Operating Officer Tony James said in the announcement. “We expect that adverse fundraising conditions in the hedge fund industry will prevent these two initiatives from scaling up to a size where they are meaningful for our business on a stand alone basis.”
HedgeFund.net said total assets in single manager hedge funds fell 16% in third-quarter 2008 (see Q308 Bleak for Hedge Funds ).