Liquid Alternatives: Blackstone Liquid Alternative Fund Drops H2O As Sub-Adviser

May 29, 2020 | Liquid Alternatives, News
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The $6.1 billion Blackstone Alternative Multi-Strategy Fund had not allocated any funds to H2O over the past two years.

According to a Bloomberg report, which quoted a person familiar with the situation, the decision to dump H2O was not related to performance. H2O is a majority-owned unit of French company Natixis SA.  Bruno Crastes and Vincent Chailley run the asset manager.

Blackstone Group (NYSE: BX) is the largest alternative investment firm in the world.

H2O

H2O will cease to be a sub-adviser for the Blackstone liquid alternative fund effective May 31. Blackstone appointed the firm in May 2017 based on its experience, quality of personnel, and performance at the time.

However, H2O has been in the news for the wrong reasons over the past year.

Last summer, clients yanked over € 8 billion from funds under the firm’s management due to their exposure to bonds linked to Lars Windhorst, a financier facing legal troubles in Germany. Earlier this month, Windhorst agreed to buy back a portfolio of illiquid stocks and bonds from H2O.

H2O was again rocked on its heels by the coronavirus outbreak when its flagship bond funds lost up to 50% of their value in a matter of weeks.

Blackstone Alternative Multi-Strategy Fund (NASDAQ: BXMIX)

This fund has also been under the weather this year. According to Bloomberg, it ranks among the bottom 16% of peers with a decline of more than 11% as of May 27.

Liquid alternative funds have not been spared the crisis from COVID-19.

Earlier this month, JPMorgan (NYSE: JPM) shuttered six exchange-traded funds including four liquid alternative ETFs effective mid-June. On average, liquid alts lost 7.9% between the market’s peak in February through to May 6, according to Morningstar Direct.

The reason for dumping H2O

According to Bloomberg, there was a vast difference between the strategy that H2O employed for its own hedge funds, and what was assigned to it as a custom mandate by Blackstone for the liquid alt fund.

“Given that Blackstone had not seen the need to use that mandate for several years, and with the H2O sub-advisory contract up for annual renewal this month, Blackstone decided to let it lapse,” said the report.

Related Story:   RIP [60:40]. Liquid Alts Solve the New Equation                                                

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