In an industry struggling with investment losses, these hedge funds have bucked global trends and are ramping up their recruitment efforts
(Bloomberg) – Izzy Englander’s US$34 billion (S$47.8 billion) Millennium Management is planning a contrarian move this year in an industry that’s struggling with investment losses and client redemptions: It’s ramping up hiring.
So are a handful of other firms, including Ken Griffin’s Citadel and Jake Gottlieb’s Visium Asset Management, that rely – like Millennium – on multiple managers to invest client money.
At a time when many hedge funds are letting employees go, these multimanager firms are able to add talent because they boasted some of the top returns in the industry last year and attracted billions in new capital. Their approach to investing – hiring small teams of traders to manage money independently from one another – means they need lots of bodies to put their growing assets to work. In all, at least half a dozen such funds made Bloomberg’s global ranking of the 50 top-performing large funds with more than US$1 billion (S$1.4 billion) in assets.
“There are some funds that are seizing the moment to take advantage of quality people who were in the wrong place at the wrong time,” said Gary Goldstein, head of executive search firm Whitney Partners.
There are plenty of portfolio managers and analysts looking for work. Last year, 674 funds closed in the first three quarters, the worst nine-month period since 2009, according to Hedge Fund Research Inc. The closures weren’t just among small firms. Fortress Investment Group LLC shut its US$2.3 billion (S$3.2 billion) macro business run by Michael Novogratz after posting losses for almost two years. Bain Capital decided to shutter its Absolute Return Capital fund after more than three years of declines.
Crowded Trades
Other funds still in business shrank after losses and client defections. Mason Capital Management, which has been around since 2000, saw at least four investment professionals depart in January after its main fund tumbled almost 20 per cent from the start of 2014 to 30 September, and assets fell to US$5.6 billion (S$7.9 billion) from US$9 billion (S$12.7 billion) at the start of last year.
Unlike some of last year’s biggest losers, which got hurt by crowded and sometimes concentrated trades, the multimanager funds succeeded because they are more diversified. The largest ones invest across many strategies, meaning that there’s a greater chance of having positions that are making money. They also tend to be market neutral, so bets on rising prices are matched by wagers on tumbling securities. The model worked especially well in 2015 for funds with teams of equity traders, because more than half the stocks in the Standard & Poor’s 500 Index tumbled.
Blackstone’s Senfina
One of the newest entrants in the strategy was the best performer last year. Blackstone Group LP, which oversees the world’s biggest fund of hedge funds with US$69 billion (S$97 billion) under management, opened its Senfina Advisors unit in 2014. It now runs about US$2 billion (S$2.8 billion) across about 10 teams and posted a 21 per cent return, ranking it eighth on Bloomberg’s list, tied with Tybourne Equity.
In one of the worst years in recent history for money raising, the multimanager platforms pulled in the lion’s share of capital. Millennium raised US$3.8 billion (S$5.4 billion) in 2015, or almost one-tenth of the net inflows for the entire industry. It stopped taking cash at the end of the year while it looks to add to the 180 teams it already has, according to people familiar with the firm.
Paloma Partners, run by Donald Sussman, is also planning on adding employees after almost doubling in size, with assets jumping to more than US$4 billion (S$5.6 billion) today, from US$2.3 billion (S$3.2 billion) in January 2015, according to a person familiar with the firm. Paloma returned 11.1 per cent last year.
Surveyor Unit
Even as the multi-manager platforms add to their employee ranks, they tend to cull those who lose money or can’t scale their investments. Griffin’s Citadel, with teams that manage money across credit, stocks, fixed income, macro, commodities and quantitative strategies, recently fired about 15 investment professionals from one of its equity units after the firm lost 6.5 per cent in its main hedge funds in the first six weeks of the year. The unit, called Surveyor, has about 200 employees across 27 teams.
Citadel still plans to build a second Surveyor unit this year, said a person familiar with the firm. Citadel’s Global Equities fund, which is also composed of multiple teams, ranked 15th in Bloomberg’s ranking with a return of 17.2 per cent. Its main multi-strategy fund is tied for 31st place in the ranking. The firm has a third fund that made the cut, the US$3.5 billion (S$4.9 billion) Citadel Tactical Trading, which relies on the Surveyor and Global Equities units.
Visium, which manages US$8 billion (S$11.3 billion), also expects that its headcount will rise in 2016 in its New York, London and San Francisco offices even as it cuts managers who have been overseeing portfolios of US$50 million to US$100 million (S$70.3 million to $S140.7 million) and consolidates its capital around traders who can run US$200 million to US$500 million (S$281.4 million to S$703.4 million), said people familiar with the firm’s plans.
Crestline’s Hires
Other firms are jumping on the multimanager bandwagon. Fort Worth, Texas-based Crestline Investors, which farms out about US$2 billion (S$2.8 billion) of client money to hedge funds, is committing US$250 million (S$351.7 million) to start its own market-neutral stock fund run by several teams. The unit will initially receive about 20 per cent of Crestline’s portfolio allocation, and the firm eventually plans on raising external money for the fund, said the person, who asked not to be identified because the matter is private. Crestline made its first hires in May and expects to have nine teams of two or more people by 1 March.
Officials for the firms declined to comment on their expansion plans.
‘More Complex’
“One of the really difficult things is finding high-quality talent,” said Don Steinbrugge, managing partner of Agecroft Partners in Richmond, Virginia, which helps hedge funds raise money. In addition, firms have to ensure they compensate people adequately so they don’t walk out the door, and they must build a hefty infrastructure, including risk management, because they are dealing with a lot of different portfolios, often across strategies.
“It’s a lot more complex than a standard fund,” Steinbrugge said.
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So are a handful of other firms, including Ken Griffin’s Citadel and Jake Gottlieb’s Visium Asset Management, that rely – like Millennium – on multiple managers to invest client money.
At a time when many hedge funds are letting employees go, these multimanager firms are able to add talent because they boasted some of the top returns in the industry last year and attracted billions in new capital. Their approach to investing – hiring small teams of traders to manage money independently from one another – means they need lots of bodies to put their growing assets to work. In all, at least half a dozen such funds made Bloomberg’s global ranking of the 50 top-performing large funds with more than US$1 billion (S$1.4 billion) in assets.
“There are some funds that are seizing the moment to take advantage of quality people who were in the wrong place at the wrong time,” said Gary Goldstein, head of executive search firm Whitney Partners.
There are plenty of portfolio managers and analysts looking for work. Last year, 674 funds closed in the first three quarters, the worst nine-month period since 2009, according to Hedge Fund Research Inc. The closures weren’t just among small firms. Fortress Investment Group LLC shut its US$2.3 billion (S$3.2 billion) macro business run by Michael Novogratz after posting losses for almost two years. Bain Capital decided to shutter its Absolute Return Capital fund after more than three years of declines.
Crowded Trades
Other funds still in business shrank after losses and client defections. Mason Capital Management, which has been around since 2000, saw at least four investment professionals depart in January after its main fund tumbled almost 20 per cent from the start of 2014 to 30 September, and assets fell to US$5.6 billion (S$7.9 billion) from US$9 billion (S$12.7 billion) at the start of last year.
Unlike some of last year’s biggest losers, which got hurt by crowded and sometimes concentrated trades, the multimanager funds succeeded because they are more diversified. The largest ones invest across many strategies, meaning that there’s a greater chance of having positions that are making money. They also tend to be market neutral, so bets on rising prices are matched by wagers on tumbling securities. The model worked especially well in 2015 for funds with teams of equity traders, because more than half the stocks in the Standard & Poor’s 500 Index tumbled.
Blackstone’s Senfina
One of the newest entrants in the strategy was the best performer last year. Blackstone Group LP, which oversees the world’s biggest fund of hedge funds with US$69 billion (S$97 billion) under management, opened its Senfina Advisors unit in 2014. It now runs about US$2 billion (S$2.8 billion) across about 10 teams and posted a 21 per cent return, ranking it eighth on Bloomberg’s list, tied with Tybourne Equity.
In one of the worst years in recent history for money raising, the multimanager platforms pulled in the lion’s share of capital. Millennium raised US$3.8 billion (S$5.4 billion) in 2015, or almost one-tenth of the net inflows for the entire industry. It stopped taking cash at the end of the year while it looks to add to the 180 teams it already has, according to people familiar with the firm.
Paloma Partners, run by Donald Sussman, is also planning on adding employees after almost doubling in size, with assets jumping to more than US$4 billion (S$5.6 billion) today, from US$2.3 billion (S$3.2 billion) in January 2015, according to a person familiar with the firm. Paloma returned 11.1 per cent last year.
Surveyor Unit
Even as the multi-manager platforms add to their employee ranks, they tend to cull those who lose money or can’t scale their investments. Griffin’s Citadel, with teams that manage money across credit, stocks, fixed income, macro, commodities and quantitative strategies, recently fired about 15 investment professionals from one of its equity units after the firm lost 6.5 per cent in its main hedge funds in the first six weeks of the year. The unit, called Surveyor, has about 200 employees across 27 teams.
Citadel still plans to build a second Surveyor unit this year, said a person familiar with the firm. Citadel’s Global Equities fund, which is also composed of multiple teams, ranked 15th in Bloomberg’s ranking with a return of 17.2 per cent. Its main multi-strategy fund is tied for 31st place in the ranking. The firm has a third fund that made the cut, the US$3.5 billion (S$4.9 billion) Citadel Tactical Trading, which relies on the Surveyor and Global Equities units.
Visium, which manages US$8 billion (S$11.3 billion), also expects that its headcount will rise in 2016 in its New York, London and San Francisco offices even as it cuts managers who have been overseeing portfolios of US$50 million to US$100 million (S$70.3 million to $S140.7 million) and consolidates its capital around traders who can run US$200 million to US$500 million (S$281.4 million to S$703.4 million), said people familiar with the firm’s plans.
Crestline’s Hires
Other firms are jumping on the multimanager bandwagon. Fort Worth, Texas-based Crestline Investors, which farms out about US$2 billion (S$2.8 billion) of client money to hedge funds, is committing US$250 million (S$351.7 million) to start its own market-neutral stock fund run by several teams. The unit will initially receive about 20 per cent of Crestline’s portfolio allocation, and the firm eventually plans on raising external money for the fund, said the person, who asked not to be identified because the matter is private. Crestline made its first hires in May and expects to have nine teams of two or more people by 1 March.
Officials for the firms declined to comment on their expansion plans.
‘More Complex’
“One of the really difficult things is finding high-quality talent,” said Don Steinbrugge, managing partner of Agecroft Partners in Richmond, Virginia, which helps hedge funds raise money. In addition, firms have to ensure they compensate people adequately so they don’t walk out the door, and they must build a hefty infrastructure, including risk management, because they are dealing with a lot of different portfolios, often across strategies.
“It’s a lot more complex than a standard fund,” Steinbrugge said.
Related stories:
Singapore banking giants challenge global firing trends
Satellite comms firm probes for S’pore STEM talent
Demand for HR professionals set to skyrocket
