New York: Arvind Raghunathan, former head of Deutsche Bank AG’s global arbitrage business, will open his new hedge fund firm next month with more than $1 billion (Rs4,780 crore), a sign that investors are trickling back after record losses last year.
Roc Capital Management Lp.’s assets will include $500 million in a separate account from Deutsche Bank, according to people familiar with the New York-based firm, who asked not to be identified because the information is private. It’s the largest hedge fund start-up this year, one of at least eight expected to raise at least $250 million each, according to brokers who provide credit and lend securities to managers.
The ventures are being set up by executives who left banks that scaled back trading to conserve capital, or hedge funds whose 2008 losses will limit bonuses for at least another year. Investors see them as an opportunity to get in early with the next George Soros or Paul Tudor Jones, who have outperformed rivals for most of their careers.
“In the past month we have started to see family offices and institutions request information about high-quality launches,” said Emma Sugarman, head of US capital introductions at BNP Paribas SA in New York. “These groups tell us they are looking for the next generation of talent.”
The expectation of money coming in is spurring traders to open their own shops. Jayesh Punater, chief executive officer of New York-based Gravitas Technology, which provides systems and consulting services to financial firms, said he met with 19 new hedge funds in the first three months of the year, and more than that this quarter. “There’s a lot of money sitting on the sidelines and waiting to be allocated.”
Tony Chedraoui, a former portfolio manager at Deephaven Capital Management, is starting London-based Tyrus Capital Llp. in October with at least $500 million, according to two people familiar with the matter. Chedraoui managed about $1.5 billion at Deephaven, including its $500 million European event fund, the only fund that Deephaven didn’t sell to St Francis, Wisconsin-based hedge fund firm Stark and Roth Inc. in January when it closed. Money from the European fund was returned to clients, most of whom are likely to invest in Chedraoui’s London-based fund, the people said.
Money is beginning to flow into funds as performance rebounds this year, with returns averaging 9.8% through May, according to index published by Chicago-based Hedge Fund Research Inc. The industry had net inflows of $1.5 billion in May, the first gain in 10 months, Singapore-based Eurekahedge Pte Ltd said.
Josh Berkowitz, Marcel Kasumovich and three partners started Woodbine Capital Advisors Lp., a global macro fund that trades stocks, bonds, currencies and commodities, in January with about $180 million after leaving Soros Fund Management Llc. They will be running about $700 million by July, according to people familiar with the New York-based firm. Executives at the firms all declined to comment, as did Michele Allison, a New York-based spokeswoman for Deutsche Bank.
While more money is coming into the industry after two quarters of outflows, established managers are the largest beneficiaries. Nearly every established fund is now open for investment, including some that were previously hard closed for years, so there is a tremendous competition for capital, said Charlotte Burkeman, New York-based global head of capital introduction at UBS AG.
Neil Paragiri, a New York-based managing director at Harcourt Investment Consulting AG, which invests about $4 billion of client money in hedge funds, said he’s meeting new managers and is seeing strong talent emerging from the proprietary desks of investments banks. “It’s a good opportunity for them to start a new fund now given the dislocation in the markets, especially for distressed debt and equity strategies,” he said.
A Deutsche Bank surveyin March found investorswere more reluctant to invest in new hedge funds, yet more than 30% were willing toconsider start-ups run by managers with a verifiable track record from their former employers. Management fees for new stock funds are tending toward 1.5% of assets, rather than the traditional 2%.
The new funds are makingit easier for investors topull their money, and aren’t including clauses in theirdocuments that let themlimit withdrawals or create sub-portfolios for hard-to-sell assets.
There’s an entrepreneurial spirit emerging out of the ashes following the fallout in the fourth quarter, said Philippe Peress, a former Fortress Investment Group Llc. portfolio manager who is starting his own hedge fund, Harness Investment Group in London. Bloomberg
Bei Hu in Hong Kong and Netty Ismail in Singapore contributed to this story.