PureVC

Merrill takes stake in GSO Capital

For those of you who thought that the flurry of hedge funds activity was bubbly and frothy, take note that earlier this week Merrill Lynch acquired a stake in GSO Capital Partners, a firm with $8 billion under management. I haven't dugg around to find out details of the transaction, but GSO is a relatively new firm started in 2005 by some ex-Credit Suisse guys who were originally out of the leveraged buyout practice of DLJ. I don't know this crew well, but it looks like they have nicely built up a following in only 2 years of business.

Not only have they built up assets but they have managed to attract investment from Merrill. This is only a feat possible by a well-connected crew.

I've said before that the alternative investment industry is horrible at creating strong in-house niche practices, except for a few exceptions such as the DLJ group at Credit Suisse. This is further evidence that a bulge bracket bank must usually bring in an outside boutique rather than grow organically. Typically when the entire fold in occurs, this means that the returns will decrease and the specialized practice will lose its luster. The bank will have trouble retaining key employees and then another lift-out or exodus will occur. Thus another cycle will ensue.

I'm not saying that this is always the case. But when the minority stake turns into a majority stake and the specialized group loses its autonomy, things can often go sour.

SkyBridge Invests in Steeplechase

Here's a quick shout out to my guys at SkyBridge Capital. They recently announced an investment in Steeplechase Partners, a Chicago-based long/short equity fund run by Michael Derick, previously of JP Morgan, Basswood Partners,  and Citadel Investment Group. Once again, the guys at SkyBridge have done a great job of finding another strong horse to back. Keep up the strong work boys.

Blackstone Update

I must apologize to my readers for I haven't blogged in nearly a month. In all honesty it's been an extremely busy month for me and I also was laid up for a week with a horrible bout of the flu. I'm back now in full force and can't believe only a week ago I was so sick that I was wishing I was not alive.

So the big news is that Blackstone has amended its IPO filing while concomitantly taking in a large $3 billion investment from China. China's investment for an almost 10% non-voting piece of the company helps put a valuation on the company. It will probably end up being a "floor" on the valuation as I suspect that the China investment will significantly up the appeal of the firm to investors. Not only is it strategically opening up the largest market in the world, it is basically doing so with the blessing of the Chinese government. There are few financial firms that have this kind of clout or can gain this kind of clout with China. Goldman is the obvious leader in currying favor with China on the economic front.

I must admit that I was somewhat skeptical about the Blackstone IPO. I have not always favored private investment firms going public because in many ways it is merely the cashing out of key personnel in those firms. There is a large part of me that feels that when the shit hits the fan, those firms who kept themselves private and did not sell out to the short term market demands of investors, will have more permanence. However, with this move by Blackstone, I do see opportunity for the investor and particularly opportunity for Blackstone to become a major raider in China.

I'm looking forward to the IPO. Maybe it will be the beginning of the end of the beginning of an even newer boom.

On another note, things are definitely heating up in the IPO space. There seem to be more tech filings of late and for my IPO junkies out there I promise that when I have more time I will start to dissect some S-1s for you.