Tomorrow’s Titans 2019

Fifty rising fund managers

Hamlin Lovell, Contributing Editor

This is the sixth edition of our Tomorrow’s Titans report. The Hedge Fund Journal launched the report in 2010 as a biennial report – and I am proud to say that I began my association with the publication at that time. In 2018 we skipped a year so we could move our hugely successful 50 Leading Women in Hedge Funds report from a biennial to an annual occurrence. Now we are in the happy position of being able to publish this year both Tomorrow’s Titans, which focuses solely on investment professionals, and the 50 Women report, which focuses on both investment and non-investment professionals.

The managers in this report are rising stars who, in our opinion, are on the cusp of being, or have the potential to become, leading managers within their strategies. They may not attain billions in assets under management because some strategies, such as relative value commodity trading, small cap equity long/short, or short-term trading, probably cannot be easily scaled up to billions of assets. We are also wary of singling out headline-catching day one assets in the nine-figure bracket, because quite a few of the largest launches have only survived a year or two. That’s possibly to do with the fact that their fixed cost base was too high, or they had the wrong investor base. Lowly correlated single digit returns might well be ideal for a European insurance company, but fall short of the high single digit target sought by most US pension plans.

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THFJ Tomorrow’s Titans 2019 [PDF]

We pride ourselves on the fact that the nominations come from our extended network of readers, subscribers and contacts, including: pension funds; family offices; endowments; foundations; funds of funds; private banks and wealth managers; insurance companies; prime brokers; administrators; custodians; depositaries; law firms; accountancy firms; exchanges; technology providers, and others.

Just as many hedge fund managers who have branched out from the Julian Robertson hedge fund family tree are Tiger “cubs” or “grandcubs”, so too many former Tomorrow’s Titans have spawned launches. We might well dub some of the managers in the 2019 Tomorrow’s Titans report as “Tomorrow’s Titan cubs”. For instance, one of the activists in this report, Alexander Captain of Cat Rock Capital, previously worked at Tiger Global, whose founder, Chase Colman, featured in our 2010 report. As such Captain is both a Tiger “grandcub” and a Tomorrow’s Titan “grandcub”.

The managers in this report are rising stars who, in our opinion, are on the cusp of being, or have the potential to become, leading managers within their strategies.

Hamlin Lovell, Contributing Editor, The Hedge Fund Journal

The geographic split – 27 from the Americas, 18 from Europe and five from Asia/Pacific – roughly reflects the split of hedge fund assets. We would expect Asia to grow its share over time judging by the buoyancy of launch activity there. While most of the US managers are clustered around the tri-state area, and most of the European ones are in London, we have received nominations from all over the US and Europe. Beyond this we have managers from Brazil and Sweden in this report, and we are more than open to featuring managers in any location. On my travels I have visited managers in countries including Thailand, Malaysia, Russia, the Czech Republic, Poland and Finland. It’s worth noting that the birth places of the managers in this report are much more diverse than their current workplaces, since many are migrants.

We have kept tabs on dozens of “pre-launch” managers but need to take comfort from the fact that they have already launched – or are on the brink of launching – before deciding to include them in the report. Over the years, we have witnessed many launches being delayed for six or nine months or more (particularly where onshore regulators and UCITS funds are involved!). So we are happy for other publications to get the first scoop on probable launches that have yet to materialise.

Founder-managed firms in this report have been around for between one month and ten years. The range is wide as managers who go solo at an earlier stage of their career need more time to get established than those who do so later. We see no point in imposing an age cap. Plenty of managers, such as PSAM’s Peter Schoenfeld, have successfully launched in their 50s.

44

Most of those featured in the report (44 of the 50) have founded their own firms.

Most of those featured (44/50) have founded their own firms, but since two-way traffic exists between emerging hedge fund managers and established platforms, we think it makes sense to include some examples of those who have developed strategies or launched funds within larger groups. The preponderance of firm founders is partly because we hear about new management companies more often than strategies being quietly incubated within larger houses.

Only 12 of the 44 who started their own firms have disclosed a seeder. Some seeders are dedicated seeding firms such as Stable Capital, Tages Capital or Trium Capital, while others are pension funds and family offices (which often do not publicly disclose their identity). Pension funds in particular have written some of the largest seeding tickets in recent years, but the number of such deals appears small.

The strategy split: 13 equity long/short managers; nine event-driven managers; nine credit managers; six equity market neutral managers; three activists; two emerging market specialists; two discretionary commodity traders, two discretionary macro traders and two relative value traders, is not exactly representative of the industry. If it were, long/short equity would make up a larger share. We have a slight bias towards strategies that seem innovative in this list: three managers are using AI or machine learning for equity market neutral approaches. Two have developed systematic and quantitative strategies for trading credit, which is also relatively unusual.

Most of the managers were previously working for larger asset managers or hedge fund managers, including: Baupost; Blackrock; Blackstone; BlueCrest; Brevan Howard; Bridgewater; CarVal; Citadel; Davidson Kempner; Lombard Odier; Millennium Partners; Moore Capital and Point72. A handful worked for bigger shops that have returned capital to investors, such as Eton Park, Glenhill and Gruss. Two came from the Harvard Endowment and one from a Canadian pension fund. In what may be a new phenomenon, three previously worked at Fidelity, which is most renowned for long only investing but does run some long/short strategies.

We have a slight bias towards strategies that seem innovative in this list: three managers are using AI or machine learning for equity market neutral approaches.

Hamlin Lovell, Contributing Editor, The Hedge Fund Journal

In terms of background, Goldman Sachs is the common strand running through this list: at least ten managers are Goldman alumni. Perhaps Goldman fosters the entrepreneurial spirit to a greater degree than the other investment banks, though some managers have also worked for: Morgan Stanley; UBS; JP Morgan; Deutsche Bank; and emerging market investment bank, Renaissance Capital.

Around one third (15/50) finished academic study with their Bachelors’ degrees, though the majority have Masters’ degrees or MBAs. Only six have PhDs, of which three are running systematic and quantitative strategies with three running discretionary strategies. Doctorates may be a prerequisite nowadays for research roles in some systematic managers, but elsewhere they seem unusual. Seven of these managers are CFA charterholders. Incidentally, though many in this report have earned various academic honours and distinctions, we omit these from bios for the sake of brevity and consistency. Some companies also omit these details from corporate bios; they are not easily comparable between countries and colleges; and the over-riding issue is that this report is based on professional rather than academic achievements.

The dearth of women in this report partly reflects the general industry problem that women remain severely under-represented in investment roles. But we are confident that many of them will follow in the footsteps of managers who have featured in earlier Tomorrow’s Titans reports in generating alpha, launching new strategies and products, and raising billions where appropriate.