Blackstone Group has raised its exposure to former Citadel trader Nick Taylor by putting up another $50 million to co-invest with his Asia-focused hedge fund, sources said, a move that may set the tone for similar deals in the region.
Taylor, one of Asia's well known portfolio managers, launched Senrigan Capital in 2009 with about $150 million, including $100 million in seed capital from Blackstone.
The hedge fund later received a further $50 million from Blackstone and grew to $1 billion in assets last year.
The new agreement allows the U.S. private equity group to invest alongside Senrigan in one or more of Taylor's ideas.
The latest vote of confidence from Blackstone comes at a tough time for Senrigan, which is one of only five or six hedge funds in Asia to hit $1 billion in assets post-2008.
Run by British-born Taylor, the event-driven fund lost 8.6 percent last year, erasing its entire 5.85 percent gain in 2010. The fund is down a further 7.2 percent through mid-May this year, sources familiar with Senrigan's returns said.
Event-driven funds focus on mergers and acquisitions and on strategies such as capital-structure arbitrage.
Blackstone and Hong Kong-based Taylor declined to comment.
The arrangement between Senrigan and Blackstone may prompt other hedge funds in the region, especially those employing event-driven strategies and trading illiquid assets, to offer co-investing, which is popular in the private equity industry but is rare for hedge-fund investing in Asia.
"It could become more popular with some investors, family offices mainly, that would like to lever off top ideas," said James Fallon, a director at the prime broking unit of Bank of America Corp, adding large endowments and foundations could also take advantage of the uncommon co-investment structure in Asia.
SURGE IN ASSETS
Co-investing attracts investors like Blackstone as the fee is typically much lower than the standard 2 percent management fee and 20 percent performance fee they pay to hedge funds.
In the private equity industry, for example, co-investment deals are usually priced at 1 percent management fee and 10 percent performance fee.
For hedge funds, it brings in access to a larger pool of capital and generates revenues.
Hedge fund seed-capital providers make money when the fund generates returns and also take a cut from the management fee.
In Senrigan's case, Blackstone has not made money through portfolio gains but has benefited from the fund's surge in assets. Senrigan quadrupled assets to more than $800 million in 2010 and managed about $1 billion at the end of last year.
Taylor's fund is one of about 15 deals that Blackstone has done so far, totalling investments worth about $1.5 billion, people with knowledge of the matter said.
This article is copyrighted by Reuters
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