Steven Schonfeld amassed a billion-dollar fortune by seizing on short-term market moves. Sitting in a Park Avenue office dressed in a black hoodie and white sneakers, the 55-year-old former stockbroker described a plan to compound his wealth by finding and funding a new crop of star traders.
Schonfeld Group Holdings already has 34 teams managing $7.5 billion of positions and is seeking to get bigger. His family office offers a home for top Wall Street portfolio managers as banks are constrained by new rules limiting trading for their own books. One of the biggest teams, Quantbot Technologies, which has been working for him for six years, is run by a nuclear physicist who helped establish electronic-trading platforms at Morgan Stanley and Merrill Lynch & Co.
“We can be flexible, entrepreneurial and nimble,” said Schonfeld. The Dodd-Frank Act and the Volcker Rule have meant “the banks lost a lot of talent, and we were able to have an offering that was unbelievably competitive.”
Schonfeld is trying to lure trading teams through an unusual structure. He helps pay startup costs, gives access to the family office’s technology and vendors, and provides capital. The new company, which agrees to manage only Schonfeld’s money for the first few years, doesn’t have to give up a stake in the firm or in its intellectual property.
Schonfeld also is willing to have his money locked up for a long time. He signed a seven-year agreement with Quantbot in 2009 and last year extended it through 2027.
“All of us are competing for the best talent,” said Schonfeld, a Long Island native who built a $90 million home there in Old Westbury with a poolside cabana and a nine-hole golf course. “If we’re going against firms with $20 billion, $30 billion, $40 billion of cash and hundreds of billions in notional positions, you have to figure out a unique differential of why would you come here.”
While Schonfeld seeks money managers ready to start their own funds, Quantbot is using the extended commitment to add strategists who have new trading ideas but haven’t gained experience implementing them.
Other funds are seeking to train young traders who no longer have the option of seasoning on banks’ proprietary desks. Hedge-fund billionaire Paul Tudor Jones is backing a joint venture called LaunchPad that will give 20 young macro traders a chance to develop skills before managing client money. Brevan Howard Asset Management is allocating a portion of its master fund to be overseen by younger employees with expertise in computer-based strategies.