All new names populate the 2014 Tomorrow’s Titans survey. Arguably at least half of those in our 2010 and 2012 surveys are worthy repeats – based on continuing asset growth and performance– but this year we want to prioritize the showcasing of new talent that we have not covered before.
Aside from that, the process follows the pattern of previous surveys. We contact allocators including family offices, funds of funds, pension funds, insurance companies, endowments and foundations, and service providers. Nominators remain anonymous and the long list of nominations reached a couple of hundred names. Fifty names are selected on a mix of criteria – performance, assets, pedigree, reputation and testimonials. The geographic split is broadly proportional to industry assets with the USA home to most hedge fund assets, Europe in second place, and Asia third.
An important new trend is managers breaking away from funds in the 11-figure bracket (assets above $10 billion) and launching hedge funds aiming at, and often quickly hitting, the 10-figure bracket – the billion-dollar club. Inflows can mount up swiftly when former employers are closed to new investors – as Herbert Wagner’s old shop, The Baupost Group, is. Even when giants are open, more entrepreneurial managers may want to run their own firm: as with Alex Denner of Sarissa who was at Icahn; ex-Redwood Rich Barrerra who founded Roystone Capital; one time Ziff Brothers manager Wui Yen Liow who started Aravt Global; and Sachem Head’s Scott Ferguson, and Marcato’s Mick McGuire, both of whom were formerly at Bill Ackman’s Pershing Square.
The morphing of other huge hedge funds into family offices has been another driver of bulge bracket launches. Some luminaries of the hedge fund industry are no longer accepting external assets. Soros Asset Management, and SAC (now renamed as Point 72) have effectively converted into family offices. Both of these behemoths are now spawning new hedge funds. One ex-SAC manager is Jason Karp of 2012 launch Tourbillon, which already has around a billion dollars of assets. Three ex-Soros managers are Keith Anderson of Anderson Global Macro, and Michael Yoshino and Kenneth Lee of upcoming Hong Kong launch Pleiad.
“Tiger seeds” and “Tiger cubs” (who were seeded by, or worked for, Julian Robertson) seem to be perennial fixtures in any kind of rising stars survey. This year our Tigers include Hound’s Jonathan Auerbach, who is now into his 10th year since Tiger seeding; Tiger Ratan’s Nehal Chopra into her third year – and already topping the performance league tables – and Dag Løtveit of Trient, in Norway.
As banks continue to retreat from prop trading, due to regulations such as Dodd-Frank, former proprietary traders set up their own funds. Wingspan’s Buckley Ratchford was a partner at Goldman Sachs, and Argentière’s Deepak Gulati was previously head of prop trading at J.P. Morgan. If banks largely exit prop trading, non-financial companies may become a nursery for talented traders, such as Paul Schurman, who was head of energy derivatives at commodity giant Glencore.
Dozens of firms worldwide are actively seeding new hedge funds. The largest players include Blackstone, Brummer and Reservoir, all of which write hefty tickets up to $300 million. For instance Shakil Ahmed’s Princeton Alpha was seeded with $250 million from Blackstone and Robert Dafforn’s Bybrook with $200 million; Tim Attias and Santiago Alarco’s Canosa got $250 million from Brummer and Buckley Ratchford’s Wingspan received $250 million from Reservoir. We also feature Borut Miklavcic’s LindenGrove, the 20th fund seeded by Paris-based New Alpha. A new Hong Kong-based seeder, HS Group, will seed Michael Yoshino and Kenneth Lee’s Pleiad. We had nominations for managers funded by many other providers of seed, acceleration and emerging manager capital, including Ascalon Capital, Dyal Capital, Grosvenor Capital, IMQubator, Investcorp, Larch Lane Advisors, Northern Lights Capital, Paloma Partners, Protégé Partners, Samena Asset Managers and SEB Alternative Solutions, toname but a few.
Some managers in the survey raised hundreds of millions of dollars on day one without any (publicly disclosed) seeder, but it is not essential to start with a nine-figure level of assets. Admittedly survey after survey, including the annual EY hedge fund survey, shows costs are still rising globally. But the example of activist Sahm Adranghi shows how it is still possible to start with a million dollars and grow to a few hundred million. The prize for most spectacular asset growth probably goes to Lei Zhang’s Beijing-based Hillhouse Capital, which began with $30 million from the Yale Endowment and now runs $7.5 billion.
As always we have to enter into the customary caveat that any survey of this kind must omit abundant talent, so our list of 50 names should be viewed as a selection of examples of potential future hedge fund industry leaders – and not as an exclusive list. As well as ruling out former survey constituents, space constraints force us to overlook a huge number of very high calibre nominations this time. If there are 10,000 hedge funds worldwide, it seems likely that many hundreds could be tomorrow’s titans – and may indeed appear in future surveys. In particular we received many nominations of female portfolio managers, some of whom may find their way into next year’s Leading Women in Hedge Funds survey. We will happily wager that many of this year’s names will be running 11-figure levels of assets within a decade from now, and will measure their net worth in 10 figures.
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EY congratulates the fifty leaders selected as Tomorrow’s Titans by The Hedge Fund Journal. As the hedge fund industry continues to explore innovative growth opportunities, EY remains committed to helping Tomorrow’s Titans and their colleagues around the world to build new strategies and products and develop distribution networks and channels in which they have traditionally not been engaged.
As a leading global service provider to the hedge fund industry, we have helped many firms develop from start-ups to become some of the largest players in the financial community. Our dedicated team of hedge fund professionals is proud to provide tax services to approximately half of the top 100 Global Billion Dollar club hedge funds and to audit approximately 40 percent of these institutions. EY is also proud to audit more than half of the top 20 European and top 25 Asian funds. This depth of experience gives us a unique view of the new challenges facing fund managers today, along with the ability to quickly provide innovative guidance that firms need.
Looking over the list of Tomorrow’s Titans, we are confident in the emerging talent that the hedge fund industry is producing across the globe. This selection of Tomorrow’s Titans demonstrates that the dynamics of the hedge fund industry are changing. Fund managers are not just focusing on assets in the billions, but are entrepreneurial and starting funds on a smaller scale as well.
EY is excited to see how these individuals will shape and evolve the hedge fund industry. We look forward to continuing to collaborate closely with Tomorrow’s Titans and their colleagues for many years to come.