Morning Coffee: Schonfeld loses star portfolio manager. 29-year-old UBS escapee's wild nights at the club
If you've been running your own $900m macro hedge fund and have decided to close it down, working for a multistrategy hedge fund might seem like a fine thing. For Ben Melkman, it did, for a while. When Melkman joined struggling multistrat Schonfeld in March, he declared that it was the best of both worlds: "I can keep my flexibility, my autonomy and they can take care of all the parts of the business that are a distraction such as legal, tax, compliance and technology.”
Schonfeld was possibly not the best choice for hedge fund nirvana, though. Eight months after joining, Bloomberg reports that Melkman is among the 15% of staff leaving Schonfeld after its talks with Millennium broke down. Sources tell us he wasn't cut but chose to go. Melkman is understood to have negotiated a clause in his contract that didn't allow Schonfeld to reduce the capital they allocated to him in the first year. After Schonfeld's outflows (and despite its negotiation of $3bn of verbal funding commitments), Melkman decided to make a preemptive exit.
It's a reminder that multistrategy hedge funds aren't always the wondrous employers they seem. If they're not churning staff, they're berating them for taking too little risk or struggling to allocate them the kind of capital they'd promised. Away from the biggest funds, many others also stand accused of having fairly terrible technology. We'd predicted that Schonfeld would need to invest more in technology talent after breaking off with Millennium; instead, technology staff were among those cut yesterday.
It's not clear what Melkman will do next, but he has plenty of choices. He made his reputation at Brevan Howard, another multistrategy fund that's been hiring heavily, or Jain Global is out there looking for staff.
Separately, if you're a 29-year-old UBS banker looking for a change, you could go into business with a depleted billionaire hedge fund manager investing in luxury hotels in Puerto Rico. This is what Fahad Ghaffar reportedly did ten years ago. He's spent the past decade hanging about in the tropics working with John Paulson, the hedge fund billionaire who once had $13bn but now has $3.5bn.
Ghaffar was Paulson's wing man and at some point in the last decade he spent $20k on a single night at a Las Vegas nightclub, and $100k on Louis Vuitton purchases, both of which Paulson says were illicitly on the company card and Ghaffar says was his own money.
Unfortunately, that particular odyssey has come to an end. Paulson has fired Ghaffar; Ghaffar is taking Paulson to court for allegedly deceiving him into investing in luxury car dealerships among other things. It's complicated.
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Meanwhile...
Schonfeld cut 150 people, but only 10 were in investing roles. Five were portfolio managers; some were attributed to underperformance. (Bloomberg)
Schonfeld’s assets doubled in the past two years, from about $6bn to almost $12bn, and the firm embarked on an expensive hiring spree. Its headcount increased from about 600 to more than 1,000 in the same period. But it didn't achieve returns to justify that. (Financial Times)
75-year-old Izzy Englander still owns 100% of Millennium and it's not clear who will replace him, particularly since Bobby Jain left. Englander hired Paul Russo, Scott Rofey and Jeffrey Verschleiser to lead risk at Millennium in 2020, but they're unlikely to replace him. Chief operating officer Ajay Nagpal took on the additional role of president. Ex-Goldman partner Justin Gmelich is co-chief investment officer. A succession battle is possibly brewing. (Financial Times)
Anthony Clake, a 43-year-old hedge fund executive at Marshall Wace, has a sidelining investing in the search for sunken treasure. (Bloomberg)
Deutsche Bank hired Ian Wesson from Citi for hedge fund M&A. (Financial News)
Asset management bonuses will fall 30%. “Margin compression from directionless markets and salary inflation and elongated sales processes have made for challenging times." (Financial News)
Generative AI will "free up" 40% of Accenture staff to do other things. Developers will be validating AI code rather than writing it themselves. (Bloomberg)
A bed in a hole in the wall with a curtain around it is a thing now. “There’s so much friction in the world right now, the ability to retreat into a safe place at home is very appealing. There’s something embryonic about it.” (WSJ)
The Association of British Insurers (ABI) has scrapped traditional CVs for new recruits by hiding the names and education of all job applicants in an effort to boost diversity. (Telegraph)
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