Blackstone and Private Equity Trend

Blackstone Group’s total assets rose to $119 billion at the end of September from around $111 billion (including non-fee earning assets) in the previous quarter.  Look at the disaggregated numbers and you see a strong trend.

Investors Brace for Foreclosure Losses

By Chidem Kurdas

Managers of credit funds at Goldman Sachs and other asset management firms are warning their clients that litigation and government actions to prevent or restrict residential foreclosures could reduce returns. The funds do not hold or service mortgages but are buyers of mortgage-backed securities.

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Replicator Beats Managers

An index that tracks reproducible hedge fund performance had significantly higher return than actual hedge funds in the period that started January 2008. Boris Arabadjiev, chief investment officer of the Credit Suisse fund of hedge funds group, found that this replicator outperformed underlying hedge fund strategies by as much as three to five percentage points.

What does it mean?

Elliott Dominates Event-Driven Portfolios

Chidem Kurdas

Look at a big investor’s event-driven holdings and a name you’re likely to spot is Elliot Associates LP. Longevity and a reliable track record probably have something to do with it—Paul Singer, a lawyer, founded Elliot in 1977.

Goldman Sachs Capital Raising Stalls

Money is moving into hedge funds, but it has certainly not gone to Goldman Sachs. Alternative investments managed by the bank show a net outflow of capital in the third quarter, even as the firm’s asset management arm had an increase in fee revenue thanks to market appreciation in the value of investments.

Too-Big-To-Invest Problem

Chidem Kurdas

Back in the day when hedge funds managed more then $2 trillion, nearly half of the capital was channeled via funds of funds.  Current assets are still well below that – even with post-crisis recovery – and funds-of-funds assets are a significantly smaller fraction of the total. There are fewer funds of funds around and a small number of very large ones dominate the market.

 As a result of these developments, hedge funds have fewer investors. And some of those investors find themselves with a problem: they account for too much of the capital of the funds they’re in. Their investment may be no larger than before, but because the pond has shrunk, they’re now relatively big fish.

Energy Exploration Attracts

A number of hedge funds have invested in companies that look for oil and gas or acquire properties with proven reserves. Among the favorites is Plains Exploration & Production Company but big producers like Exxon Mobil continue to attract investors as well.

Accredited Investor Rule No Barrier

One of the provisions of Dodd-Frank is a change in the criteria the determine who’s an accredited investor. This might have an adverse impact on hedge funds by shrinking the client pool. But most people don’t think so, according to a survey at a conference.

Apollo Senior Debt Fund

Chidem Kurdas

With the flow of leveraged buyout deals not likely to recover any time soon, big private equity firms are increasingly focused on other types of investments. Thus Leon Black’s Apollo is to start a fund to invest primarily in senior secured loans issued by below-investment-grade companies.

This is separate from the $400 million collateralized loan obligation Apollo is reportedly raising with JP Morgan as the marketer.

Blackstone and Barclays on Credit Cycle

What does the boom in junk bond issuance mean? Is it a sign of credit market strength? Or is it the next bubble?

A report from Blackstone Group drew a somewhat somber picture, suggesting that high-yield financing and re-financing may defer rather than prevent distress at weaker and smaller companies.