Reuters – Blackstone Group LP said on Tuesday it plans to liquidate two hedge funds as a lack of outside investing amid tight credit markets will prevent them from getting big enough to be meaningful to the company.

The private equity firm plans to consolidate its distressed securities fund with GSO Capital Partners, a hedge fund manager it acquired in March for $10 billion.

Blackstone also plans to spin off Blackstone Kailix advisers, the investment manager of its long/short equities fund, to a management team led by Manish Mittal, who plans to form a new fund as an independent entity.

"We believe these measures will enable us to operate more profitably in the current environment," Chief Operating Officer Tony James said.

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Business Intelligence Middle East  – International Tax lawyers are urging private-equity and hedge-fund clients to restructure their partnerships so they can sidestep the higher taxes that president-elect Barack Obama has vowed to impose on their profits.

Obama’s promise to revive a failed 2007 bill forcing executives to pay rates of 35% or more instead of the 15% capital-gains tax has prompted lawyers to advise the firms to take measures such as setting up offshore entities. That would help circumvent higher taxes on so-called carried- interest profits that executives at the firms typically earn.

The lawyers say they are pressing their clients to act before the year’s end on the assumption that any law or regulatory change won’t apply before 2009.

“If you wait to do it, then to unwind or restructure later will be very difficult and trigger significant tax penalties,” said Mike Kosnitzky, who heads Boies Schiller & Flexner’s tax practice in New York and is advising clients.

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Tags: amp, assumption, barack obama, boies schiller, business intelligence, capital gains tax, flexner, international tax lawyers, measures, middle-east, offshore entities, partnerships, president elect, profits, regulatory-change, tax penalties