Blackstone Group and Fidelity Investments aim to expand their reach to retail clients and rid the hedge fund market of its perceived exclusivity with the launch of Blackstone's Alternative Multi-Manager Fund.
The new mutual fund of hedge funds was launched last month and consists of various sub-advisors, including HealthCor Management, Two Sigma Advisors, Good Hill Partners, Nephila Capital, Wellington Management, Chatham Asset Management and Caspian Capital.
Fidelity's Portfolio Advisory Service (PSA) - which consists of funds with a minimum value of USD50,000 - has invested near USD1bn in the fund thus far.
The fund, managed by Blackstone's hedge fund team, will have a net expense ratio of 2.40 per cent - more than double the cost of a traditional mutual fund.
Despite the high costs, the Alternative Multi-Manager Fund allows retail clients access to hedge fund components usually restricted to financial experts, such as troubled debt, commodity speculation and shorting stocks.
Findings by Barrons and Morningstar released in June indicate that more investors are directing their attentions towards alternative mutual funds. Of 235 institutions included in the survey, 45 per cent were accessing long-short strategies through mutual funds, up from 38 per cent in 2010, whereas 28 per cent used hedge funds for the same strategies, far short of 61 per cent in 2010.
Tom Hill, vice chairman of the Blackstone Group, says: "When pioneering a unique investment solution, it is essential to have confidence in the firms with which you create an alliance. In the three years we have been planning for this product launch, we have built a very solid relationship with Fidelity.
"Like Blackstone, Fidelity is a leader in the asset management industry and has a history of providing great value to its clients by combining innovative products and expertise to help investors meet their goals. Given the complexities associated with bridging the gap between mutual fund regulations and hedge fund strategies, we are very happy with the Fidelity relationship."