Blackstone’s credit arm GSO Capital Partners has announced plan to launch a new, fully integrated, internal direct lending business.

Bennett Goodman, co-founder of GSO Capital Partners and senior managing director of Blackstone, said: “Given the evolution of our firm, moving ahead independently to control our own destiny in this area was the right decision for our business.

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“Bringing together our direct lending investment expertise with our strong institutional and growing retail distribution capabilities represents an extremely powerful combination. Our shareholders will also now receive a much larger share of the value we create through managing these types of portfolios.”

At the same time, GSO will sever its investment sub-advisory relationship with FS Investments’ funds effective 9 April 2018. Temporarily, GSO will continue to offer investment services to the FS Funds and help ensure a smooth transition.

As a result of the breakup, GSO will receive a total of $640m from FS Investments for offering such services and GSO’s partnership with FS Investments in the FS Funds’ business over the last decade. The amount is expected to be paid in 2018.

Blackstone plans to use the payment proceeds for the benefit of its shareholders and will provide additional details on those actions early 2018.

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Goodman added: “We thank FS Investments for their partnership over the years and wish them the best going forward. We are proud of the investment performance and portfolio construction of the funds and are committed to working with FS to make sure there is a smooth transition.”