BOSTON (Reuters) - Two hedge fund veterans who worked at SAC Capital Advisors, LP and Pequot Capital Management, long considered among the industry’s most successful, are launching their own firm next month, people familiar with the matter said on Monday.
Larry Foley, who had been a senior portfolio manager at SAC from 1994 to 2008, and Paul Farrell, a member of Pequot’s executive committee and co-portfolio manager of its Scout Fund Group, plan to open Bronson Point Partners on January 1, 2010.
Foley and Farrell’s pedigree will likely prompt many hedge fund industry investors to give the pair a close look. But how much money the men will actually manage to raise remains unclear at a time when investors are becoming ever pickier about where they commit their capital.
To woo potential clients, Bronson Point’s principals said they have committed at least $25 million of their own money and promise a “disciplined approach to fund-raising, organic growth and risk management.” They will concentrate on U.S. stocks, running a so-called long/short equity strategy.
Investors traditionally want to see fund managers invest part of their own fortunes, with plans to expand the fund in a measured way.
To get into Bronson Point, investors need to put down $1 million, an average figure for most small hedge funds. It will charge a 2 percent annual management fee plus an incentive fee of 17 percent to 20 percent, depending on how long investors agree to leave their money with the new firm.
Bronson Point in its brochure promises to use an "opportunistic approach combining fundamental research and active portfolio management." The team, which also includes ex-SAC trader Jonathan Marcus, said retailer Bed Bath & Beyond BBBY.O and regional sporting goods store Hibbett Sports HIBB.O are among the fund's core holdings.
Foley and Farrell are among a growing number of investment managers who are trying to set up their own firms at a time pension funds and endowments are eager to put money into alternative assets like hedge funds to try and recoup losses during the financial crisis. Former Goldman Sachs star Mark Carhart is also planning to launch his own firm next year.
While people with powerful resumes like Foley and Farrell used to be able to raise hundreds of millions of dollars quickly, analysts said it will be harder for newcomers now.
Investors want more details about how people who break off from huge firms will run their own, often a difficult task when they have been used to working with a team of risk managers, lawyers and marketers.
Analysts also noted concerns about Pequot’s history after its founder, Arthur Samberg, surprised investors and employees by shutting down the firm in May after regulators reopened a probe into possible insider trading.
SAC Capital Advisors manages $12.9 billion and has scored an average annual return of 30 percent since its launch in 1992. The returns have stirred envy on Wall Street and speculation about how its founder, Steven A. Cohen, managed to deliver such consistently strong returns for so long.
Reporting by Svea Herbst-Bayliss; Editing by Richard Chang
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