Consolidation among hedge funds kicked into gear in 2008 and has continued through early 2009, contributing to the broader decline in fund employment. In some cases, fund executives follow their portfolio of investments to their new home: Take the April acquisition by BlackRock Inc. of R3 Capital Management, a credit hedge fund started just last year by former Lehman Brothers executives. Market turmoil and resulting losses have driven some fund managers to seek mergers with stronger partners. In R3's case, it's combining its $1.5 billion in assets with a familiar partner. BlackRock was an original investor in R3, which will keep its name and most of its senior management. Typically, fund mergers and buyouts lead to a downsizing of back-office and legal staff, or the acquirer may simply absorb the target fund's assets and manage the holdings with its existing portfolio managers and traders.
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