Blackstone is folding its hedge fund seeding operation into its $60bn Absolute Return platform, a move designed to give the firm greater scale as competition intensifies among multi-strategy managers seeking to attract and retain trading talent, according to a report by Bloomberg.
The Strategic Alliance Fund (SAF), which provides early-stage hedge fund managers with long-term seed capital, will now operate within Absolute Return, with investments sourced and executed by the same teams that allocate capital across hedge funds and other strategies.
Traditionally, SAF has offered emerging managers around $150m in locked-up capital in exchange for a share of revenues. Under the new structure, Blackstone will be able to combine SAF commitments with capital from its Absolute Return platform and family office channels, allowing it to back new firms with between $250m and $450m.
The consolidation gives Blackstone greater flexibility in structuring deals, potentially lowering fee burdens while offering larger and more competitive capital packages to traders in high demand across the industry.
The restructuring will see Brian Snider, who co-led the seeding business, depart the firm, according to people familiar with the matter. The remaining members of the team will stay on. Snider declined to comment.
Under the revised model, Absolute Return investment teams covering equities, credit, quant and macro strategies will identify and allocate capital across asset classes and hedge fund styles. The Absolute Return platform sits within Blackstone’s $96bn Multi-Asset Investing business, led by Joe Dowling.
SAF’s longer-term future will be assessed once the current fund is fully invested. Around $500m of capital remains to be deployed, and Blackstone is in discussions with multiple managers.
Blackstone has already begun executing hybrid funding structures. Recent examples include backing Arrowpoint Investment Partners, founded by Jonathan Xiong, which received a SAF-style seed investment alongside approximately $300m from Absolute Return, taking total capital to around $450m. Covara Capital has also received similar blended allocations.
