Goldman Sachs is said to be in negotiations to sell one of its most notable portfolios, Petershill, which has suffered some major setbacks in its hedge fund investments.
Asset Management Finance, a firm that takes stakes in money managers, is considering buying Petershill, a five-year-old Goldman portfolio that owns pieces of established hedge funds, according to people with knowledge of the discussions. The people cautioned that the talks with Asset Management Finance, which is majority-owned by Credit Suisse, could still fall apart.
The prospect of the sale comes as the hedge fund industry is dealing with a raft of legal issues, weak performance and new regulatory scrutiny.
Started in 2007 with $1 billion, Petershill tried to capitalize on the explosive growth of the industry and tap into a steady stream of lucrative fees. It aimed to buy multimillion-dollar stakes in big-name hedge funds.
Petershill has hit some home runs with its investments.
Assets at Winton Capital Management, a computer-driven trading house based in London that had staggering gains during the financial crisis of 2008, have multiplied to $29 billion since Goldman bought its stake. Capula Investment Management posted a string of strong returns and steady asset growth, even during the depths of the crisis; assets at Capula have more than tripled since Goldman first invested in the firm, to about $13 billion today.
But Petershill has experienced some major blowups, tracking the experience of the broader industry.
One of its investments, Level Global Investors, closed after it was ensnared in the government’s crackdown on insider trading. Level Global closed less than a year after Petershill bought a stake.
In 2011, another Petershill holding, Shumway Capital Partners, suffered a management upheaval. The founder of the hedge fund, Chris Shumway — who trained under Julian H. Robertson Jr., the founder of Tiger Management — tried to hand investment duties to a deputy, but investors revolted. After a wave of redemptions, Mr. Shumway decided to return the remaining money to investors, just months after Petershill bought a stake.
Weak returns have also been a problem. In 2011, hedge funds underperformed the Standard & Poor’s 500-stock index and finished the year with a loss. One of Petershill’s investments, Trafalgar Asset Managers, was felled by investor redemptions, following subpar performance.
Last summer, the head of Petershill, Jonathan Sorrell, left to be the head of European strategy for the Man Group, the publicly traded hedge fund giant.
The potential Petershill deal makes sense for Asset Management Finance. The firm already owns stakes in 21 managers, including hedge funds like Brigade Capital Management and FX Concepts. It typically takes minority positions in these funds, just as Petershill did.
It was unclear how much of Petershill would be bought Asset Management Finance or how much the firm would pay. But the people with knowledge of the deal said the firm was interested in buying most of the portfolio. Credit Suisse and Goldman declined to comment.