According to a release, Blackstone will combine the distressed fund with its GSO credit investment business, a move the company says will eliminate duplication, benefit from shared intellectual capital and better serve investors. Blackstone had purchased GSO Capital Partners last March for $930 million. Investors in Blackstone's distressed securities fund will be able to transfer their capital on preferred terms to distressed strategies managed by GSO, while the existing fund will be liquidated.

The investment manager of Blackstone's long/short equities fund, Blackstone Kailix Advisors will be spun off to its management team led by Manish Mittal, who intends to form a new fund as an independent entity. Blackstone will be an investor in the new fund and investors in the existing fund will be offered the option of investing in the new fund on a preferred basis as their interests in the existing fund are liquidated.

"We believe these measures will enable us to operate more profitably in the current environment," says Tony James, president and COO, in a statement. "Although these funds have performed better than the S&P 500 and other global market averages, we expect that adverse fundraising conditions in the hedge fund industry will prevent these two initiatives from scaling up to a size where they are meaningful for our business on a stand-alone basis."