Blackstone Group LP, the world's largest private-equity firm, said it will combine its distressed securities hedge fund with its GSO unit, which also invests in troubled assets, and spin off a stock fund, Bloomberg reported.
The Blackstone Distressed Securities Fund will be liquidated and investors will have the option to move their money to funds managed by GSO, the New York-based company said today in a statement. The firm will also separate Blackstone Kailix Advisors, an equity hedge fund, into an independent entity.
Blackstone, run by Stephen Schwarzman, bought GSO Capital Partners LP this year for as much as $930 million to expand its investing in distressed assets including leveraged loans. Hedge funds have become Blackstone's largest business by assets, overseeing $55.1 billion as of Sept. 30, more than its private- equity and real-estate funds.
John Dionne, who managed the Blackstone Distressed Securities Fund, will remain at Blackstone. Blackstone doesn't disclose the amount of assets managed by individual funds. The firm had total assets under management of $116.3 billion as of Sept. 30.
"Compared to Blackstone's total AUM, the sizes of the funds affected" are minimal, said Peter Rose, a spokesman for Blackstone.
Blackstone Kailix will be managed by Manish Mittal, who plans to run it as a new fund, according to the statement. Blackstone said it plans to be an investor. The fund both buys stocks and sells them short, a bet the price will decline.
Blackstone rose 9 cents, or 1.5 percent, to $5.98 at 4:02 p.m. in New York Stock Exchange composite trading. The stock has dropped more than 80 percent since Blackstone's June 2007 initial public offering.