Blackstone Alternative Asset Management (BAAM), Blackstone’s hedge fund solutions business, is to launch its first alternative investment-focused mutual fund that offers daily liquidity.
BAAM, which is the world’s largest discretionary allocator to hedge funds and has approximately USD49bn under management, is developing this custom solution for a strategic investor by leveraging its longstanding relationships with some of the industry’s leading hedge fund managers.
J Tomilson Hill (pictured), vice chairman of Blackstone and chief executive of BAAM, says: “We achieved our status as a premier hedge fund solutions provider by preserving capital in the midst of volatile markets and by developing innovative solutions to meet our investors’ needs. We are delighted to enter this market and to offer a daily liquid product that provides portfolio diversification through alternative strategies that are designed to be uncorrelated with those of traditional asset classes.”
The Blackstone Alternative Multi-Manager Fund is a registered, open-end mutual fund that is managed by Blackstone Alternative Investment Advisors. The investment objective of the fund is to seek capital appreciation by allocating assets among a variety of investment sub-advisers with experience managing non-traditional or “alternative” investment strategies. Blackstone may also manage a portion of the fund’s assets directly and may invest in unaffiliated hedge funds.
Through the use of alternative investment strategies, Blackstone seeks to provide low beta to equity and fixed income markets. The fund’s multi-manager, multi-strategy structure will allow Blackstone to dynamically shift capital to take advantage of the team’s top-down market views with the goal of managing risk and generating alpha. Blackstone will employ the same disciplined investment process and will utilise the same experienced investment team that has long served its institutional clients.
John McCormick, senior managing director and head of global business strategy for BAAM, says: “Blackstone has spent the last three years analysing and preparing to enter the market for liquid alternatives. Our research led us to believe that there are a few critical success factors that will separate the winners from the losers. First, you have to provide access to leading investment talent. Our industry position and relationships allow us to offer access to a group of the highest-conviction hedge fund managers on BAAM’s roster — managers currently representing a significant amount of BAAM’s capital on a dollar and percentage basis. Our track record of structuring value-added transactions has enabled us to secure this capacity. Second, significant investments in technology and infrastructure are necessary in order to operate effectively in a daily environment, subject to 1940 Act rules. Finally, you have to ensure that your manager due diligence and investment processes are consistent with those that have proven successful over time, and that the underlying strategies lend themselves to a successful transition to a daily, more highly-regulated environment.”
Stephen Sullens, senior managing director and head of portfolio management for BAAM, says: “We approached the portfolio construction process by leveraging our extensive experience constructing custom solutions for sophisticated institutional investors. We are confident that we have identified hedge fund strategies and manager skill sets that translate well into a multi-manager solution in a 1940 Act framework. Investors in this product will benefit from the full breadth of Blackstone’s manager due diligence and screening procedures, top down asset allocation views and ongoing portfolio management capabilities.”