A Goldman Sachs private equity fund that invests in hedge fund managers is in talks to buy a minority stake in London-based Trafalgar Asset Managers, according to the Daily Telegraph newspaper. The $500 million Petershill fund, which is managed by Jonathan Sorrell, has been in talks with Trafalgar since 2007, the newspaper quoted unnamed sources as saying. Petershill is seeking a minority, non-controlling stake in Trafalgar, which manages some $2.7 billion of assets. If an agreement is reached, it would be the third stake to have been bought in a London-based hedge fund for the London-based private equity fund. Last year, Petershill bought a 10 per cent stake in Winston Capital Management, and last month took a 20 per cent stake in Capula Investment Management. Analysts have been expecting consolidation in the $1.9 trillion hedge fund industry with its estimated total universe of 10,000 funds. GLG, for example, has held talks with merger arbitrage fund Tisbury Capital about a possible takeover. GLG is Europe's second largest hedge fund manager, controlling $24billion of assets.