Updated with correction
The quality of hedge fund startups has improved dramatically in the past 18 months as successful portfolio managers with strong track records left mature firms to strike out on their own.
These newly minted entrepreneurs tend to be older, more experienced and have more personal wealth than founders of most of the hedge fund firms launched earlier in the decade.
“These people are different: They have already made $100 million, $500 million or almost $1 billion of their own money. They are starting with several hundred million of their own money as investments in their funds,” said Afsaneh M. Beschloss, president and CEO of hedge funds-of-funds manager The Rock Creek Group LP, Washington.
“These are not itsy-bitsy funds. (They have) strong back offices,” Ms. Beschloss said, stressing “it's no longer that (the) old, established (hedge funds) were the best and the new ones are risky. Both can be good; both can be risky.”
Ms. Beschloss made her comments during a presentation about the hedge fund industry to the board of trustees of the $132.4 billion Teacher Retirement System of Texas, Austin, earlier this summer, a webcast of the meeting showed.
The 2015 class of hedge fund startups started by experienced portfolio managers and traders is well on its way to attracting significant assets. Among those that have leaped into the billion-dollar range so far this year:
• Thunderbird Partners LLP was launched in May by David J. Fear, managing partner and chief investment officer, and manages $1.7 billion, according to the August update of the firm's Securities and Exchange Commission ADV filing. Mr. Fear was president of ZBI Europe LLC, the London office of family office Ziff Brothers Investments LLC, which closed its hedge fund business.
• Folger Hill Asset Management LP is the brainchild of Solomon “Sol” Kumin, CEO, and the former chief operating officer of now-shuttered S.A.C. Capital Advisors LP. The company started trading in March and managed $1.2 billion as of June 30, according to data provided by the firm for Pensions & Investments' annual hedge fund survey.
• Lion Point Capital LP began managing assets in April and manages $950 million, its ADV showed. The firm was founded by Carl D.M. Cederholm, CIO, who was a senior portfolio manager at Elliott Management Corp., and James B. Freeman, head of research, who was a senior analyst at Perry Corp.
That combination of experience, track record and money in these midsize launches is attractive to institutional investors, creating a popular group of new-old hedge fund companies, observers noted.
Launch sizes for new, well-pedigreed hedge fund firms are between $500 million and $1 billion or more. That's a bigger pot than most portfolio managers who spun out between late 2008 through early 2014 could attract, sources stressed.