As some hedge-fund companies give back capital to clients and convert to family offices, they are using variations of Schonfeld’s strategy.

George Soros’s family office is putting in as much as $500 million to help Isaac Corre open Governors Lane, which will focus on event-driven investing and seek other investors, according to people familiar with the firm. Chris Shumway, who runs Shumway Capital, has provided startup capital from his family office to get new hedge funds off the ground in exchange for an ownership stake.

Schonfeld said he achieves higher returns than a more traditional family-office approach, even with the cost of paying more than 250 people. He also said he would find indexing and outsourcing boring compared with trying to lure talent away from the largest global hedge funds and banks.

Quantbot Arbitrage

Some of that talent is heading to Quantbot, a statistical arbitrage fund that bets on small price differences in correlated securities and has 25 employees managing $1.5 billion in positions. It was founded in 2009 by Michael Botlo, a 56- year-old Austrian known as Michi who was a staff physicist at the Superconducting Super Collider in Texas before going to work on Wall Street. The firm is hiring and expanding its strategies into additional markets including China and into futures in all asset classes.

“We needed to grow faster and better,” said Botlo, whose education includes a doctorate in experimental nuclear physics from the University of Vienna and a weekend cram session with QuickBooks to learn how to create a balance sheet. “At some point, with all these great ideas, you still run out of alpha.”

Outside Money

Schonfeld’s own firm has changed dramatically over the past 27 years. He took the money he made at brokerages Blinder Robinson & Co. and Prudential Bache Securities and hired traders to execute his strategies. His company grew to 1,100 employees by 2000, thriving during the Internet boom as day-trading came into vogue. The firm handled about 150 million shares a day in 2005, according to a company statement at the time.

As electronic and algorithmic trading eroded some advantages, Schonfeld began shrinking that operation, which now accounts for only about 5 percent of the firm’s revenue. He helped spin out a hedge fund led by one of his former traders, Dmitry Balyasny, whose Balyasny Asset Management now oversees more than $8 billion.

In 2003, Schonfeld started taking outside money from friends and family members. The experiment lasted a few years.