Insurance Linked Securities Specialist Nephila Hired by Blackstone Vehicle

By Miles Weiss | May 20, 2015

A Blackstone Group LP vehicle offering hedge fund strategies to mutual fund investors plans to allocate money to a firm backed by rival KKR & Co.

The Blackstone Alternative Multi-Strategy Fund is hiring Nephila Capital Ltd. as a sub-adviser, according to a filing on May 18 with the U.S. Securities and Exchange Commission. Nephila, based in Hamilton, Bermuda, specializes in trading securities and financial instruments whose returns are tied to catastrophic and weather-related risks, such as hurricanes. It managed $9.5 billion as of March 31.

KKR and Blackstone Group are both New York-based investment firms that have been branching beyond their private equity roots by offering hedge funds as well as vehicles for real estate, natural resources and other types of assets. Both have also been courting a broader group of investors by offering mutual funds.

In January 2013, a KKR subsidiary bought a 24.9 percent passive stake in Nephila Holdings Ltd., the parent company to Nephila Capital. KKR has a seat on the parent’s five-member board, according to a regulatory filing.

Blackstone Alternative Multi-Strategy, which had net assets totaling $1.2 billion at the end of March, parcels out its client money to hedge fund managers whose strategies range from global macro to opportunistic and quantitative trading. With the addition of Nephila, the Blackstone fund has 20 sub-advisers, including Rail-Splitter Capital Management, Waterfall Asset Management and Two Sigma Advisers.

Nephila was founded in 1997 by Frank Majors and Greg Hagood as part of Willis Ltd., a reinsurance broker. The trading firm relocated to Bermuda two years later to gain a local presence in what it describes as the world’s catastrophe reinsurance center. It’s named for a spider that, according to Bermuda folklore, can predict bad weather.

Representatives of KKR and Nephila didn’t immediately return telephone calls seeking comment. Peter Rose, a Blackstone spokesman, had no immediate comment.

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