Goldman Sachs Raises $1.3B To Buy Minority Stakes in Hedge Funds

Nov 19 2015 | 6:20pm ET

Goldman Sachs has reportedly pulled together a $1.3 billion war chest to buy stakes in hedge funds, higher than its original target, in a redux of its 2007-vintage Petershill fund. 

The company started raising money for the venture in 2013, according to a Bloomberg report, and originally thought it would raise $1 billion. 

As with the first fund, which raised $1 billion, Petershill II will buy minority equity stakes of 10-20% in hedge fund firms with strong four-to-five year track records and AUM between $2 billion and $15 billion. The second fund is already investing, according to Bloomberg, with transactions to date including stakes in credit fund Knighthead Capital Management LLC, macro specialist Caxton Associates LP and long/short equity manager Pelham Capital Management LLP.

Goldman’s venture similar to those put together by companies like Dyal Capital Partners, Blackstone and Affiliated Managers Group. In some cases, the involvement of a company like Goldman can aid in attracting assets to the fund, which in turn increases management fees even in the face of erratic performance. When all goes well, this can deliver to the minority owner a relatively dependable income stream. 

The hedge fund owners, meanwhile, can monetize some of the equity in their firm without losing control, and in some cases take advantage of their stakeholder’s technology and compliance expertise.

Goldman’s first Petershill fund invested in nine funds, including winners such as Winton Capital, but also missed with stakes in Level Global and Shumway Capital, both of which shut down. Nonetheless, disapointing performance so far this year by many historically strong hedge funds may result in a favorable environment for companies like to Goldman to acquire stakes in good managers for attractive prices. 

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