Izzy Englander’s $34 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 $1 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 $2.3 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 percent from the start of 2014 to Sept. 30, and assets fell to $5.6 billion from $9 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 $69 billion under management, opened its Senfina Advisors unit in 2014. It now runs about $2 billion across about 10 teams and posted a 21 percent return, ranking it eighth on Bloomberg’s list, tied with Tybourne Equity.