Hedge Fund Brigade Capital Receives $300 Million Investment from Blackstone

By Svea Herbst-Bayliss

NEW YORK (Reuters) – Hedge fund Brigade Capital is receiving a $300 million investment from Blackstone (NYSE:BX) to help build its new private credit strategy and expand its collateralized loan obligations (CLO) platform, according to two people familiar with the matter.

Brigade, an established credit investment specialist, made headlines earlier this year with a joint bid for department store Macy's (NYSE:M). The firm is investing in the lucrative private credit market, where non-banks are lending approximately $2 trillion to corporations.

The Multi-Asset Investing unit of Blackstone will allocate $150 million to Brigade’s new strategy. Brigade raised about $500 million this year for this purpose and aims to explore opportunities in the lower middle market, focusing on companies generating $10 million to $50 million in earnings before interest, taxes, depreciation, and amortization (EBITDA).

Representatives from Blackstone and Brigade opted not to comment.

This allocation is drawn from the unit's Strategic Alliance Fund IV, overseen by David Ben-Ur, which manages over $1 billion in assets. Brigade is the third manager to receive seed funding from Fund IV; previously, Blackstone supported London-based Astaris Capital Management.

Brigade manages about $28 billion in assets and is expanding its reach in the private credit sector.

Overall, Brigade has raised approximately $1.5 billion to enhance its private credit platform, incorporating commitments for future funds.

The lower middle market presents lucrative lending opportunities with higher spreads and yields due to reduced competition. Examples of lower middle market borrowers include vacation rental company Awayday and mattress retailer Saatva.

Brigade's expansion into private credit gained momentum when it recruited Jenny Lee from JPMorgan Chase and Jim Wolf from Whitehorse Capital two years ago. Their extensive networks and rich experience are expected to assist in sourcing smaller, often elusive deals.

Additionally, Blackstone is committing another $150 million to support Brigade's existing CLO business, designating equity for new CLOs worldwide. This funding emerges from the Multi-Asset Investing unit's Absolute Return platform, also managed by Ben-Ur. Brigade's CLO business currently holds about $11 billion across 25 deals in the U.S. and Europe.

CLOs provide diversified exposure to the broadly syndicated loan market, capitalizing on market volatility through non-mark-to-market leverage and term financing.