Finding a new home for such money isn’t easy right now. “Increasingly, the managers who are producing the best returns are closed,” says Tom Hill, who heads up Blackstone’s $2 billion fund-of-funds operation. “And some of the really top managers are giving money back.”
His solution: On January 1 Blackstone launched Compara Emerging Managers Fund, an incubator for small but promising hedge fund managers. Structures like Compara are growing more popular, because the increasing amount of money targeted globally for hedge funds far surpasses the number of successful partnerships that are willing to accept new investors. Compara will invest up to $200 million in about a dozen managers whose trading styles will range from statistical arbitrage to long-short equity. Blackstone and two large, unnamed institutional investors are providing the initial funding for the incubator, though more partners may be added later. With so many large institutions beginning to invest in this alternative asset class, expect more of a manager shortage - and more fund hatcheries. Says Hill, “There will be an enormous capacity problem.”
