April 23, 2024

Millennium backs biggest planned hedge fund launch in more than a year

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A former Millennium portfolio manager is preparing to launch what would be the biggest new hedge fund in more than a year after securing $3bn of capital from Izzy Englander’s firm and taking up to 30 investment staff with him.

Diego Megia, who worked at Citadel before a five-year stint at Millennium, is targeting $4bn to $5bn of investor capital for the launch of Taula Capital, according to two people familiar with the fundraising effort. The macro hedge fund is expected to start trading in the first half of the year, the people said.

Although other large launches are planned for later in the year — with former Millennium co-chief investment officer Bobby Jain’s new fund Jain Global expected in July — at $4bn, Taula would still be larger than any hedge fund started last year.

Multi-strategy hedge fund Freestone Grove Partners, led by a former Citadel portfolio manager, launched with $3.5bn last week, according to one person with knowledge of the matter.

Millennium’s investment and the fact that Taula is seeking to launch with up to $5bn of capital were previously reported by industry information service With Intelligence.

Hedge fund launches have dwindled as a talent war has enticed portfolio managers to join large existing funds, while institutional investors have become pickier, reserving allocations for well-known managers from big funds with a proven record.

Millennium and other large hedge funds are known for backing talented portfolio managers starting their own funds, usually on the condition that they get preferential investing terms. Millennium declined to comment.

But it is uncommon for a portfolio manager to take a big team of investment professionals with them, as Megia has done. Taula Capital will launch with roughly 60 people, including 26 to 30 investment staff and 30 support staff, a person familiar with the matter said. Taula Capital declined to comment.

After a decade of low volatility in government bonds markets, central bank rate jumps and rising inflation have made macro trading potentially very profitable for hedge funds. Macro hedge funds such as Brevan Howard, Rokos Capital and Caxton posted enormous gains in 2022, though performance was more muted last year.

The launch comes during a difficult capital raising environment for hedge funds, as many talented portfolio managers are opting to join large multi-manager hedge funds such as Millennium, Citadel, Point72 and Balyasny.

These funds have become very popular with institutional investors seeking stable returns that can persist even when equity markets fall.

A fierce talent war between multi-managers has resulted in enormous pay packages, dissuading portfolio managers from setting up their own hedge funds.

Some of the biggest fund launches from 2023 included London-based equity hedge fund Ilex Capital Partners and New York-based hedge fund Surgocap, which launched with $2.1bn and $1.8bn in capital, respectively.

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