Merrill Lynch Buys into GSO Capital

NEW YORK (AP) – Merrill Lynch & Co., the largest U.S. brokerage, said Monday it will buy a minority stake in investment firm GSO Capital Partners LP in a bid to broaden its involvement in private equity deals.

The New York-based firm is an $8 billion hedge fund which helps finance deals for private equity firms, which buy ailing companies and later sell them. Terms of the deal weren't disclosed, but recent reports have indicated that Merrill's stake in GSO will total about 20 percent.

By investing in GSO, Merrill Lynch will be able to increase its presence in the fast-growing private equity industry. The Wall Street brokerage often competes against firms such as GSO to provide financing for private equity deals.

“GSO has a uniquely talented team of investment professionals who have extensive expertise in the leveraged finance marketplace,” said Greg Fleming, co-president of Merrill Lynch, said in a statement.

Merrill Lynch joins other investment banks, like Morgan Stanley and Lehman Brothers Holdings Inc., which have invested in hedge funds to help increase fee income. Both Goldman Sachs Group Inc. and JPMorgan Chase & Co. are two of the nation's biggest hedge-fund managers.

GSO was founded two years ago by a trio of investment bankers led by former Credit Suisse executive Bennett Goodman.