2014 saw hedge funds raise more money than any year in the previous decade. Though the industry is definitely changing, it’s still drawing huge amounts of money from investors, and that fact has to be recognized. The money is, however, going to bigger and bigger funds. A $20 million start-up fund just isn’t going to interest institutional investors.
Last year saw an incredible number of completely new hedge funds raised more than $1 billion in capital. That means that they walked right to the front of the queue, fitting into the large category of most hedge fund surveys the day their office doors opened. Of course, these were no ordinary investors. Here’s a look at the hedge fund managers that managed to attract $1 billion in 2014.
Finepoint Capital Partners
Based in Boston, Finepoint Capital Partners managed to raise $2.4 billion before it opened its doors. The fund is lead by former Baupost manager Herb Wagner. Seth Klarman’s hedge funds have been closed to new capital for a couple of years, so a fund ran by one of his disciples was always going to prove attractive.
In a letter issued just months before he departed Baupost, Seth Klarman called Wagner, who worked as a portfolio manager at the company, “remarkably talented.” The hedge fund initially opened with about $200 million of Wagner’s own money, but opened to capital in 2014 to become the biggest new hedge fund of the year.
Hitchwood Capital Master
Founded by James Crichton, who also had a hand in founding Scout Capital, Hitchwood Capital partners managed to attract $1.7 billion in its first year. That’s a step down from the almost $7 billion that Crichton decided to return to investors in the early months of 2014, but it’s a remarkable feat nonetheless.
Scout Capital closed its doors and returned cash to investors in January of 2014 after Crichton’s partner Adam Weiss decided he was no longer interested in running the firm. Crichton managed to funnel at least some of that money back into Hitchwood. Scout managed to return 21% in 2013, a record that will leave clients expecting big things from Crichton’s new firm.
Three Bays Capital
Led by Matthew Sidman, a 14-year veteran of Highfields Capital Management, Three Bays Capital managed to raise a total of $1.6 billion in 2014. The event-driven fund is based in Boston and will seek to involve itself in deep-value investing in North America and Europe.
The fund is small for the time being, employing three analysts, a head of trading and a research coordinator along with Sidman himself to make up the entire investment team. The firm made few headlines in 2014, but as soon as it manages its first big win, you can be sure you’ll hear all about it.
Two Creeks Capital Partners
Raising $1.55 billion in 2014 nets Two Creeks Capital Partners a number four on the list of biggest new hedge fund of 2014. The company was founded by Ryan Pedlow, a veteran of Ziff Brothers Investments. That hedge fund was shut last year after the Ziff Brothers decided to alter the way in which their family invests money.
Two Creeks Capital Partners is direct result of that closure. Pedlow managed to secure a two year lockup on the money he took from investors in 2014, an incredibly difficult thing for even an established hedge fund to do. That demonstrates how attractive his fund is, and gives Pedlow the power to do almost anything he wants with that money over the next couple of years.
Aravt Global Partners
Despite coming last on this particular list, Aravt Global Partners had a pretty alive 2014, raising $1.2 billion for its new fund. The company is led by another Ziff veteran Yen Liow. The investor launched his new fund in February of 2014 with $870 million, but managed to boost that to more than a billion by the time January 2015 rolled around.
It’s not clear if Yen Liow was given money by the Ziff brothers in order to help start his fund, but the family indicated that seeding new funds would form part of its overall investment strategy after its private fund closed last year.
Paul Shea is an experienced money, trading and investing writer who cut his teeth writing stock, investment and industry analysis and covering macroeconomics. Paul Shea work has been linked and quoted by MSNBC, BusinessWeek, Barrons, Zerohedge and The Blaze, and his work appears regularly on Google News and Google Finance, as well as other prominent news aggregators. He’s also written about the tech industry for the likes of Valuewalk and The Street. Paul is a senior contributor writer for TradersDNA and HedgeThink.