The biggest challenge for Blackstone, Goldman Sachs and Neuberger may be persuading the right managers to sell.
At least 20 multibillion-dollar hedge-fund firms, including Marc Lasry’s Avenue Capital Group LLC and Jamie Dinan’s York Capital Management LP, have sold minority stakes to banks, sovereign wealth funds or other asset managers since 2005.
Some founders welcome a sale as a way to increase the number of partners at their firms and help plan for succession. Patrick McMahon, founder of MKP, said at the time of his transaction with Dyal that he sold as a way to distribute equity to other insiders.
Other founders, such as George Soros, who returned outside client money in his Soros Fund Management LLC in 2011 and turned the firm into a family office, aren’t interested in seeing their hedge funds continue after they retire.
“The hedge-fund mentality is one of big egos, and the guys who have strong attributes and look good on paper don’t necessarily want to sell,” said Karl D’Cunha, senior managing director at Madison Street Capital LLC, a Chicago-based investment bank. “And the ones who are willing to sell don’t necessarily have business platforms that are sustainable.”