Millennium wrestles with the big succession question
There’s one question that has long plagued the hedge fund industry — that of succession.
Many of the world’s largest hedge funds, which today control about $4tn in assets, are grappling with what life looks like after their founders move on.
Among them is Millennium Management, the $60bn-in-assets firm founded by Izzy Englander in 1989, which today is one of the most successful hedge funds in the world.
For a long time it was thought Englander would pick a single successor to take over Millennium. Bobby Jain, who was hired in 2016 as Englander’s first co-chief investment officer, was regarded by many, internally and externally, as the frontrunner (though an insider disputed this).
But Jain’s departure last year indicated Englander had soured on the idea of having a single successor. Instead, he reshuffled Millennium’s top ranks and put in place a new organisational structure that divided responsibilities.
The people hired to execute his vision have largely been Goldman Sachs alumni — including Paul Russo, Scott Rofey and Jeffrey Verschleiser who came on board in 2021. A year later, Justin Gmelich, another former Goldman partner, joined as co-CIO alongside the promoted Russo.
“Izzy, whether knowingly or unknowingly, has turned Millennium into Goldman Sachs Asset Management,” one person who knows him well told the FT’s Harriet Agnew and DD’s Ortenca Aliaj.
From left, Greg Fleming, Izzy Englander and Bobby Jain © FT montage/Bloomberg/Patrick McMullan/ Getty Images
Indeed, Millennium, which has about 300 trading teams, has come to more closely resemble the markets division of a global bank. As Englander put it to investors in a February letter seen by the FT, Millennium has become too big for him to “carry out the required supervision” on his own.
One reason Englander has relied on former Goldman executives is that “they tend to respect hierarchies, and they are used to co-heads and committees”, a second insider said.
Though Englander often tells people he has no intention of retiring, how the succession planning plays out at the firm is of particular importance to investors.
The 75-year-old has done a good job shoring up Millennium’s position. He has moved the vast majority of investors to a long-term share class where it would take five years to fully withdraw money from the firm. Under the new terms there is no so-called key man clause, which means investors have no special option to redeem should something happen to Englander.
At the same time, clients have agreed to pay a minimum fee — effectively a management fee that provides the business with more stable revenues — on top of the cost pass-through structure, where they absorb the charges for everything from bonuses to entertainment.
As one person close to the firm put it, Englander has put everything in place. All the Goldmanites need to do is “keep the oil tanker cruising”.