Melbourne-based private investment and advisory firm Wingate Group has purchased a 19.9 per cent stake in hedge fund manager Everest Babcock and Brown.

Wingate bought more than 50 million shares for $2 million or 4 cents a share, the company said yesterday.

It bought the shares from Babcock and Brown, which previously held 28 per cent of Everest.

The hedge fund industry has taken heavy blows in the recent market turmoil, as many investors have been avoiding the high-gearing model these funds are based on.

However, Wingate managing director Farrel Meltzer said hedge funds should not be written off just yet.

"In an extreme market everything gets exaggerated," Meltzer said. "We believe the alternative investment market will grow in the long-term."

Everest was founded in 2000 and listed on the ASX in 2005. It has $2.4 billion in assets under management.

"We know the management of Everest. We think we understand the business and that it has a solid foundation," Meltzer said.

Shares of Everest Babcock and Brown peaked in July 2007 when they reached a price of $3.90. Not long after reaching this level, the price went into free fall.

Last month, the company announced it would change its name to Everest Financial Group.

The move signifies a break with its former parent company Babcock and Brown, which is struggling to meet its debt obligations.

Babcock and Brown is selling all of its assets apart from its core infrastructure operations.