A rash of small hedge fund firms suffering from “failure to thrive” syndrome and big firms looking to expand their strategy stables have perfectly aligned to make 2014 the year of the move.
Some of the hedge fund industry's most interesting personnel moves this year involved larger firms cherry-picking experienced executives from smaller firms that closed in the past few years because assets declined or simply never grew large enough to ensure survival, sources said.
Christian C. Levett, founder, closed commodity-focused Clive Capital LLP last September after returns and client redemptions reduced assets to about $1 billion from a $5 billion peak in 2011. Mr. Levett will rejoin Moore Capital Management LLC in September; he worked at Moore Capital until 2007, when he started Clive Capital.
Pierre-Henri Flamand is another victim of declining assets. Mr. Flamand spent 15 years as head of Goldman Sachs Group Inc.'s proprietary trading desk before opening European event-driven specialist manager Edoma Capital Partners LLP in 2010. He closed the firm in late 2012 after assets dipped below $1 billion from a peak of $2 billion. He is joining GLG, the multistrategy hedge fund unit of Man Group PLC, as a senior portfolio manager this month to manage a global catalyst-driven strategy.
Randy Freeman and Bernard Oppetit, co-founders of Centaurus Capital Ltd., shuttered their hedge fund last year after assets dipped to an undisclosed amount from a $5 billion peak in 2007. The entire Centaurus Capital investment team joined Fortress Investment Group LLC in May and will launch a new global event-driven and long/short equity fund this month.
Another alumnus of Goldman's proprietary trading desk, Daniele Benatoff, became available after the 2013 demise of his London-based independent hedge fund firm, Benros Capital Partners LLP. He was snapped up by Halcyon Asset Management LLC, New York, and named managing principal and co-head of the firm's London office, confirmed Thomas Hirschfeld, managing principal and Halcyon's chief operating officer.
Halcyon also selected Mr. Benatoff's fellow London office co-head, but the person is on “gardening leave” until a non-compete agreement expires, Mr. Hirschfeld said.
Far from considering hedge fund managers who closed their firms as pariahs, executives at larger firms are thrilled by the opportunity to add industry veterans.
Mr. Flamand is a good example. “We are delighted Pierre-Henri will join Man Group and play a key role as a senior portfolio manager at GLG,” said Emmanuel “Manny” Roman, Man Group's CEO, in a news release. “I have known and worked with Pierre-Henri for nearly 20 years. He is a professional of the highest caliber and I look forward to his contribution to the firm.”
“On the big picture macro level, there's more wind in the sail, and that's giving investment people confidence to make a move,” said Glenn Mills Buggy, a partner in the investment management practice of executive recruiter CTPartners LLC, New York.
“During the boom times — 2006 to 2008 — everyone was jumping out of big firms, prop traders were willing to go it on their own and startups didn't faze anybody. After the financial crash, people got really burned out trying to make it in smaller firms and there was a flight to quality, to big firms with big infrastructure,” Mr. Buggy said.
Improving economic and investment conditions also are giving hedge fund portfolio managers, analysts and top-line executives courage to move to new companies.
Mark Coombs, for example, was head of hedge fund manager selection for London-based BT Pension Scheme Management, which manages investments for the £40 billion ($66.9 billion) BT Pension Scheme. He joined New York-based credit specialist hedge fund manager MKP Capital Management LLC's London office in March as director of client development.
Another driver behind 2014's hiring spree is cold hard cash.
“A lot of hedge fund firms have been earning performance fees again for the first time in a while and that's inspiring confidence. And confidence seems always to be tied to renewed recruiting efforts,” said Matthew Jabinsky, director at executive recruiter Sheffield Haworth Inc., New York.
“There has been a significant uptick in demand in 2014 for investment managers across all investment strategies, even traditional active equity and fixed income, but it has been especially strong for a variety of hedge fund strategies. This is quite different than during the past few years, when everyone seemed to be focused on mortgage-backed securities,” Mr. Jabinsky said.
Hedge fund companies are on the prowl for “a wider diversity of strategies now,” Mr. Jabinsky said, noting a “surprisingly” high demand so far this year for global macro, emerging macro and fixed-income relative value specialists.
All three investment approaches have been out of favor for some time, but Mr. Jabinsky said market cyclicality ensures the strategies won't stay down forever. “Firms anticipate that these approaches will be back in the not-too-distant future, perhaps in 2015, and are hiring in preparation.”
Alternative investment specialists and traditional money managers alike also are picking up willing, mostly small, hedge fund companies to complement existing core strategies via acquisition.
Last week, Swiss alternative investment manager GAM Holding AG, Zurich, announced its first U.S. acquisition: mortgage- and asset-backed securities firm Singleterry Mansley Asset Management Co. LLC, Summit N.J.
Singleterry Mansley's “sought-after and specialist skillset” in MBS will be additive to GAM's existing $17 billion unconstrained/absolute return bond strategy, according to a GAM news release.
Singleterry Mansley's entire investment team, including principals Gary Singleterry, CEO, and Tom Mansley, chief investment officer, will move into GAM's New York office. The firm manages $397 million for an institutional client base. Its current fund will be rebranded under the GAM moniker, according to the release.
Singleterry Mansley's executive team already was reconsidering its own marketing strategy before GAM approached them with the acquisition proposal, Mr. Singleterry said in an interview. He said further conversations convinced both parties it was “a good fit.”
“(GAM's) global distribution network and its operational and compliance infrastructure will allow us to expand our reach into new markets and client segments,” Mr. Singleterry said in the news release.
“In particular, it will be great for us to work closely with GAM's outstanding fixed-income team and contribute to the future development and continued success of their unconstrained global bond strategy,” he added.
Messrs. Singleterry and Mansley's “ability to navigate the severe market stress in 2007-2008 and produce strong positive returns speaks for itself,” said David M. Solo, Group CEO of GAM Holding, in the release.
GAM had $128.5 billion in assets as of March 31.
Sophie Baker, Pensions & Investments' London bureau chief, and Bloomberg contributed to this story.