Blackstone Inc. (NYSE:BX) is the largest alternative asset management company in the world, with nearly $1 trillion in total assets under management as of Sept. 30. The financial institution has several multifaceted funds designed to offer diversification benefits to investors.
However, not all of Balckstone’s funds have been a pinnacle of success. Its Diversified Multi-Strategy fund lost over 90% in value over the past four years until mid-November, causing Blackstone to shut the fund by the end of 2023. At its peak in 2018, Blackstone’s Multi-Strategy Fund held over $2.3 billion in assets. However, this fell to roughly $200 million as of Nov. 21, according to Bloomberg.
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UCITS Directive Leads To Losses
Blackstone’s Multi-Strategy Fund operated under the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive of the European Union, offering investors daily liquidity for their capital. UCITS funds are structured to provide investors with more regular opportunities to access their capital compared to hedge funds.
However, several regulatory impositions are placed on UCITS-regulated funds that can result in lackluster performance. For instance, the regulations stipulate that investors must have the ability to regularly buy and sell their investments in the fund, often with daily trading options. The rules also prohibit any single asset from constituting more than 10% of the fund’s total assets under management. Practices commonly employed by hedge funds, such as direct short selling, are prohibited, and there are constraints on leverage as well as the proportion of illiquid assets held by the funds.
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