The (near) impossible task of starting a multi-strat fund
In the world of hedge funds, Bobby Jain is near royalty.
Jain first made his name as one of the best-connected bankers at Credit Suisse, and most recently worked as the co-chief investment officer of Millennium Management besides Izzy Englander.
So when Jain set out to launch a new multi-strategy hedge fund last year, he was well placed to succeed.
Even at a tough time for fundraising, Jain Global was able to pull in $5.3bn in the biggest hedge fund launch since 2018 (though well short of an initial target of $8bn-$10bn).
One year on though, Jain’s results show just how hard it is to launch a rival to hedge fund giants such as Millennium and Citadel, DD’s Amelia Pollard and the FT’s Costas Mourselas report.
The fund has gained just 2.7 per cent in the past 12 months. That puts it behind the dominant duo of Citadel and Millennium on 9.3 per cent and 9.9 per cent, respectively.
But since the start of the year, it’s done better, raking in as much as Citadel with 2.2 per cent and falling just slightly behind Millennium.
Jain gave himself an uphill climb by launching with seven strategies on day one.
Multi-manager platforms are extremely expensive businesses to run: you need cutting-edge infrastructure to support trading and risk controls, plus there’s intense competition for talent.
Even when Jain found the right portfolio managers, they were sometimes locked up in two-year non-compete agreements, keeping them on the sidelines for the firm’s first months of trading.
Drawing and investing all of its $5bn also took a year, which burned a hole in Jain’s pocket.
It bore the costs of a $5bn firm, without having invested all of its capital. “You have all the drag without the performance benefits,” said one person close to the firm’s strategy.
Investors don’t seem concerned. “The first year for us was about setting the firm up for the future,” said one.
But ultimately, returns are everything in hedge fund land, and the investor added that those figures would soon matter.
“The real race is starting for them now.”