Capital Z Investment Partners and Paine & Partners have completed the buyout of Capital Z’s hedge fund business.

While financial terms of the transaction announced Thursday were not disclosed, Capital Z's hedge fund management team and San Francisco private equity firm Paine & Partners will acquire the minority ownership position within the hedge fund management business, along with the general partnership interests held by the limited partners in two of Capital Z's alternative investment funds.

The transaction will result in the formation of a new alternative asset management business named Capital Z Asset Management. Additionally, Capital Z Asset plans to raise a new fund that will focus on sponsoring hedge fund managers, and hire additional staffers for its marketing team.

Laurence Cheng, founder and CEO of Capital Z Investment Partners, a New York alternative investment firm, will serve as the board chairman for Capital Z Asset Management.

"We believe our new company represents the first vehicle of its kind -- an entity dedicated not only to holding interests in management companies and general partners of hedge funds, but to providing a full range of hedge fund products,” Cheng said.

Capital Z, which also has offices in London and Hong Kong, isn’t a stranger to the hedge fund business. The New York-based firm is the largest dedicated sponsor of hedge fund managers, having sponsored and taken minority interests in 16 hedge fund management firms since 1998 amounting to $10.8 billion of assets under management.