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Millennium Management, the $60bn hedge fund led by Izzy Englander, and Schonfeld Strategic Advisors have terminated talks to kind a partnership, in line with individuals acquainted with the scenario.
The two multi-strategy fund managers had been in critical talks for a number of months over a deal for Schonfeld to handle cash for Millennium, giving Englander’s fund entry to its greater than 100 funding groups, the Financial Times reported final month.
However, Schonfeld has walked away from the deal after its traders stated they’d give it about $3bn extra to handle, ending what would have been a landmark transaction in one of many hottest areas of the hedge fund business, one of many individuals stated.
Millennium and Schonfeld declined to remark.
Schonfeld, which manages $11.7bn, has lagged bigger friends lately. The agency’s fundamental fund is up about 1 per cent this yr to October, whereas Millennium has returned 8.3 per cent in the identical time interval.
New York-based Schonfeld began as a household workplace in 1988 with $400,000 that founder Steven Schonfeld earned working as a stockbroker. It remains to be the third best-performing multi-strategy agency over the previous three many years, behind Ken Griffin’s Citadel and Millennium.
Investors stay eager to place cash to work with multi-manager hedge funds, which allocate capital to specialist merchants who’re overseen by subtle danger administration expertise. As bigger and extra dominant gamers equivalent to Millennium and Citadel have largely closed to new capital, smaller companies have benefited.
New cash will assist Schonfeld replenish its property after its traders redeemed greater than $2bn this yr to October. The hedge fund, which provides shoppers month-to-month liquidity, has been making an attempt to safe longer-term capital that can assist it higher face up to intervals of stress amid the next rate of interest setting and an escalating expertise struggle.
Multi-manager hedge funds use a pass-through bills mannequin. Instead of receiving an annual administration payment, the supervisor passes on all prices to their finish traders, together with workers salaries and bonuses. As competitors for expertise has intensified, these prices have begun to eat into returns.
Partnership talks between Millennium and Schonfeld have began and stopped earlier than. The two companies held discussions in early 2020 after Schonfeld suffered a 16 per cent loss through the coronavirus-induced market rout and was requested to place up extra collateral by its prime brokers.
The talks ended after Schonfeld raised $2bn from traders.