December 3, 2012 / 5:51 PM / in 6 years

Dyal Capital raises $1.28 billion for hedge fund stakes

LONDON (Reuters) - Dyal Capital Partners, a private equity fund set up to take stakes in existing hedge fund firms, has closed to new money after raising $1.28 billion, showing that demand to invest in the sector persists despite recent poor performance.

Dyal closed the fund after attracting money from more than 40 global institutional clients and beating its $1 billion target, asset manager Neuberger Berman, which will run the fund, said in a statement on Monday.

The fund’s strategy is to back around 12 to 15 established hedge fund firms by taking minority equity stakes. Dyal has made two investments so far, and expects to complete several more in the coming months, the statement said.

Dyal did not name the two investments.

Buying stakes in already-established hedge fund managers is a relatively niche area where few competitors operate.

Blackstone Group, however, is to launch a multibillion-dollar fund to buy stakes in the secondary market, Reuters reported in October, as traditional players such as banks retreat due to disappointing hedge fund returns and more regulation.

Goldman Sachs’ Petershill fund was also active in this area.

The average hedge fund has lost money in two of the previous four years, and while returns have improved in 2012, the average fund’s 4.5 percent gain this year compares badly with the 11 percent rise in the S&P 500 index, Hedge Fund Research data shows.

When funds do make money, the return on investment can be huge for their owners because funds typically charge their clients 20 percent of any positive performance.

Reporting by Tommy Wilkes; Editing by Anthony Barker

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