The outsiders that Michael Hintze brought in to his secretive hedge fund firm didn't last long. Nor did their growth plans.
The billionaire's firm, known as CQS, a bastion of money-making whose flagship fund has returned more than three times the average of hedge fund peers since it opened in 2005, is now headed in reverse.
The Hintze-managed fund plunged as much as 45% in March and April — its worst-ever loss — missing the rebound that followed the initial shock from the coronavirus pandemic even as peers recovered to post gains in April. More than $3 billion of assets were erased, leaving the firm with $16 billion. And that doesn't include potential withdrawals from the fund's clients, who are required to give six months' notice.
"It's going to be very difficult for them to attract new assets," said Don Steinbrugge, head of Agecroft Partners, a Richmond, Va.-based consultant that helps hedge funds gather assets. "If I was an existing investor, I would be concerned about significant redemptions from the fund over time, which could potentially cause the quality of the fund to erode."
The situation reflects a stunning setback for the hedge fund legend and philanthropist who survived — and thrived — in previous crises. In January 2019, Mr. Hintze's longtime friend, former London Stock Exchange Group head Xavier Rolet, arrived at CQS headquarters overlooking Trafalgar Square as chief executive officer. "There's only so much I can do to grow this," Mr. Hintze said at the time, handing the task to his former Goldman Sachs Group colleague.
But Mr. Rolet was gone a year later with no explanation, followed by executives he'd hired and ventures in Greater China he'd announced. Mr. Hintze had a change of heart amid worries about the costs of expansion, according to people familiar with the matter. He's now returning to the firm's focus on credit markets.
Both Mr. Rolet and a spokesman for CQS declined to comment.