Blackstone Group gathered about $1.5 billion to provide startup capital for new hedge fund managers, people with knowledge of the matter said, as the alternative-asset giant continues to make bets on the industry’s growth.
Bloomberg News reports that Blackstone set a lower target for Strategic Alliance Fund III than for its predecessor fund as it saw fewer opportunities for seeding new managers, said the people, who asked not to be named because the process was private. The firm’s second fund for the strategy finished collecting $2.4 billion in 2011.
The 2011 fund hit a sweet spot for the seeding industry, as new regulations such as Dodd-Frank and the Volcker Rule put pressure on banks’ proprietary trading desks and led traders to leave and start a wave of new funds. Blackstone started the strategy in 2007 and got $1.1 billion for its first fund.
The estimated number of hedge funds peaked at about 8,500 in 2015, according to Hedge Fund Research Inc. There were about 8,300 as of the fourth quarter, according to HFR, as more funds shuttered than were started in 2016 and 2015. The industry’s estimated assets reached a record $3 trillion in the fourth quarter.
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