Millennium Management, one of the world’s biggest hedge funds, is returning about $15bn to investors while also raising billions of dollars in a private equity-style format as it tries to build a longer-term, more stable asset base.
The New York-based firm, which manages more than $57bn in assets and is headed by billionaire Israel Englander, has been looking to shift the balance of where investors’ money is held in moves that could give it roughly $40bn of longer-term assets.
As part of the plan, the firm is returning money from a shorter-term share class that lets clients exit in full in a year, said a person familiar with its plans. However, it will give them the option of investing instead in a longer-term share class that would take them five years to exit in full.
In addition, Millennium is also raising money that will be pledged to the firm and which it can call up within three years, in a structure similar to that used by the private equity industry. Once called up, that money, which is expected to be roughly $10bn, will move into the firm’s long-term share class.
The plans were confirmed by people familiar with the matter. Millennium declined to comment.
A constant danger for hedge funds is the ability of investors to redeem their money. While often requiring notice periods, with windows sometimes opening only monthly or quarterly, this can nevertheless mean that a fund with poor short-term performance can quickly lose assets.
Such an asset base can also make it difficult for funds to take longer-term positions or bets on less-liquid assets. A longer-term asset base is also seen as an important selling point when trying to attract the most talented traders.
During the global financial crisis investors pulled about half of Millennium’s assets, even though the firm suffered only a small loss in 2008.
However, investor demand to get into Millennium, which has one of the industry’s top track records, has allowed it to rejig its capital base in a way that few other firms are able. Other than 2008, the fund has not suffered a negative year since 1990 and last year it made 25.6 per cent, according to investor documentation seen by the Financial Times.
Along with previous money raised in a longer-term format, and roughly $8bn that Englander and other Millennium partners and employees have invested, about three-quarters of its assets would be longer-term capital once investors’ pledged capital is called up. The move was first reported by Bloomberg.
So-called multi-strategy funds, which employs tens or even hundreds of small teams of traders in a range of assets, have been among the big winners during the coronavirus pandemic. This year Millennium is up about 10.9 per cent, said a person familiar with the matter.