Highfields portfolio manager to leave and launch own firm

BOSTON Thu Oct 25, 2012 7:07pm EDT

BOSTON Oct 25 (Reuters) - A top portfolio manager at Highfields Capital plans to leave the investment firm next year to set up his own hedge fund, two people familiar with the matter said.

Matthew Sidman, who has worked at the Boston-based fund for 15 years, plans to leave in 2013 and launch his own firm, Highfields told investors earlier this month, according to the people, who are not authorized to discuss the matter publicly because the fund is private.

Highfields, which oversees $11.6 billion, is one of the $2 trillion hedge fund industry's biggest and most closely watched firms, with top-tier clients, including Harvard University.

The firm, run by Jonathon Jacobson, specializes in making long-term bets on undervalued securities. While it prefers to stay out of the limelight, it made headlines when it became one of a small handful of investors to publicly question Enron's accounting practices long before the energy giant collapsed.

News of Sidman's departure comes on the heels of news that another top manager at another prominent Boston hedge fund is also leaving to set up his own firm.

Herb Wagner will be parting ways with Seth Klarman's $25 billion Baupost Group after working there for 13 years, Klarman told investors this week, a person familiar with the matter said. Wagner had been Klarman's co-manager, and Klarman told investors that he does not expect to replace him in the near future. Baupost, which also invests money for Harvard, has amassed one of the best investment records in the hedge fund industry.

In Boston's close-knit investment community, Sidman and Wagner travel in similar circles. They are both listed as committee chairs for the star-studded Boston Investment Conference where both of their bosses - Jacobson and Klarman - are scheduled to speak next month.

The two men are also part of a growing number of fund managers who have trained at established hedge funds and are now taking the leap to set off on their own, making for a new crop of funds that big-name investors like pension funds could allocate money to as they look to increase their exposure to alternative assets like hedge funds.

Earlier this year, Robert Lacoursiere and James Fotheringham left John Paulson's Paulson & Co. to set up Petrarca Capital, and Scott Ferguson departed Bill Ackman's Pershing Square Capital Management a few months ago to set up his own fund.

The pace of new launches has been picking up, especially as a new rule curtails proprietary trading at investment banks, but it still lags behind the heyday of hedge fund launches before the financial crisis. This year, 549 new funds opened for business during the first half of the year, after 1,113 opened in 2011, data from Hedge Fund Research shows. In 2005, a record 2,073 new funds were launched.

But industry consultants and investors say that it is becoming ever tougher to raise fresh capital as investors like pension funds tend to prefer putting money with more established firms, with more assets under management and longer track records.

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