Blackstone to launch its own hedge fund
Not too surprising given that Blackstone is now a diversified asset management firm as opposed to a pure PE firm and already has the world's largest fund-of-funds. It looks like the fund will be concentrated long-short equity. Not sure what their "edge" is here since L/S is a highly saturated competitive space.
http://online.wsj.com/articles/blackstone-readies-big-bet-hedge-fund-14…
Its interesting to me how many people are buying at these prices, let alone the whole hedge fund craze.
Very interesting, thanks for sharing. I overheard my PM talking about taking some position in BX last Thursday.
Blackstone's share price has been lackluster given its outstanding performance as a firm. This past quarter they posted around $300 million in net income, earnings growth rate of 31%, more diversified than its competitors. However, they do have around $48 billion in dry powder, and investors are unsure whether the firm can effectively deploy that huge cash reserve. PE firms have also been left out of much of the M&A frenzy that took place this year. Schwarzman and James, understandably, are concerned with this and are looking aggressively outside of PE to generate returns.
BX has been looking for managers for some time both to hire and to seed...not just equity l/s but rather across many strategies.
Blackstone have done a lot over the past five years to diversify out of its LBO background. Still, this is a bit of a weird turn: "In contrast, Blackstone, founded in 1985 by Stephen A. Schwarzman, is looking for stock traders that will scour the globe for four to six big bets a year that may profit on either rising or falling share prices."
Sounds kind of like a Tiger Cub or Ackman style strategy.
This is all the more interesting, given that another large PE firm is getting out of this biz at the same time: http://online.wsj.com/articles/kkr-equities-strategies-fund-was-liquida…
It's very simple: poor perf + high cost structure = no assets (relative to cost structure) = operating loss for co.
A spokeswoman for the New York company said the hedge fund's "lack of scale" was a driving factor in the decision to close it.
The fund had about $500 million under management as of the start of May, about one-third of which was from KKR and its employees. The fund had fewer than 20 external investors.
Since its start in 2011, the fund reported an average annualized return of about 5%, a person with knowledge of performance said, lagging behind peers tracked by research firm HFR Inc
So if one could generalize, somewhat liberally, based on the KKR experience, this, in my mind, is the issue. Big PE firms have this idea that their sales channels should enable them to sell all sorts of financial products, including HF, to their big real money investors, rather than just PE. Unfortunately for these PE firms, it seems that this dream of "cross-selling" remains no more than that, a dream...
Yeah that's the former prop desk at Goldman, Principal Strategies. Generally speaking, bank prop guys struggle when they go out and work at a hedge fund or start their own.
Erm, I am really not sure how you're arriving at this general conclusion... Some of the biggest hedge funds in existence today were started by bank prop guys. In fact, I think I'd love a chance to "struggle" like Mike Platt, Alan Howard and etc.
Yeah Job Goldberg is hurting...LOL
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