Goldman bet looks beyond hedge fund gloom Goldman Sachs is betting that the hedge fund industry can attract more investors despite its recent performance record - by raising money for a second incarnation of one of its highest-profile investment vehicles, Petershill. Like its predecessor, Petershill II will buy minority stakes in established hedge fund management companies, in order to take a slice of the profits they make from charging fees to their clients. Goldman's move comes as hedge fund portfolios are about to record a fifth consecutive year of underperformance of the S&P 500 index, according to data provider HFR. However, this failure to live up to past successes has done little to dent investor enthusiasm and industry growth. Since 2008, HFR calculates that hedge funds have added more than $1tn to their asset base, eclipsing the levels of growth they saw in the run-up to the financial crisis. Goldman's original Petershill fund was the brainchild of Jonathan Sorrell, son of WPP chief executive Martin Sorrell, and raised $1bn for its launch at the peak of the credit boom in 2007. It was aimed at Goldman's most exclusive clients, including Libya's sovereign wealth fund, when it was controlled by the Gaddafi family. The first Petershill now owns chunks of many of the biggest names in hedge funds, including 10 per cent of the world's largest quant fund, Winton Capital, and a stake the biggest bond arbitrage fund, Capula. But it also made several missteps: its nine original investments included a stake in Level Global Advisors, which shut down after becoming entangled in the US insider trading crackdown and a stake in Shumway Capital partners, which went into liquidation after the retirement of its founder in 2011. According to marketing documents for Petershill II, seen by the Financial Times, the original fund has nevertheless returned an average of 10.8 per cent annually. Until now, its investment record has been a closely guarded secret. In a nod to the lucrative charging structure of hedge fund industry, Goldman notes that "single-digit" returns for investors can often translate into double digit returns for hedge fund owners. "We believe a unique opportunity exists to acquire direct General Partner stakes is established [hedge funds]," the documents say. Growth of the hedge fund industry and strong performance over time provides potential for attractive returns. As an example, the documents note that the first Petershill fund bought a stake in New York-based hedge fund Claren Road for $60m in March 2008 and sold it in January 2011 for $162m. Goldman reached "late-stage" negotiations to sell the whole of its remaining Petershill portfolio in April last year, but the sale was since been called off, and no new potential buyers are being sought, people familiar with the matter said. A spokesperson for Goldman declined to comment.