In the hedge fund world, size matters. That is, if a fund is too small, then it probably won't be economical – especially in light of the typical fee structure.
Well, this is a problem confronting Blackstone Group LLP (NYSE: BX). Yes, this is an unusual situation for the firm, which typically has no problem raising capital. But of course, the credit crunch continues to take a toll.
So this week, Blackstone announced that it is liquidating two hedge funds: the Blackstone Distressed Securities fund and Kailix Advisors (an equity long-short vehicle), which will be spun off to a management group. For those in the distressed fund, investors will have an option to rollover funds into the GSO debt fund (which has about $20 billion under management). But this may be a long-shot.
All in all, it's a necessary move to streamline operations to get alignment with the realities of the market. It's also a further sign that the contraction of the hedge fund industry is impacting even the largest players in the marketplace.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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