Wednesday, January 6, 2016

A Chip Off the Old Soros: A Very Large Start-Up Hedge Fund

A deep dive from Pension Pulse:

One Up On Soros?

Katherine Burton of Bloomberg reports, Ex-Soros's Bessent Raises $4.5 Billion for New Hedge Fund Firm:
Scott Bessent, who oversaw George Soros’s $30 billion fortune for the last four years, will be managing $4.5 billion by the end of the first quarter, one of the largest hedge fund startups ever.

Bessent, 53, began trading $2 billion from his former employer this week at Key Square Group, a macro fund that chases economic trends by trading stocks, bonds, currencies and commodities. The firm, which capped initial assets at $4.5 billion, raised most of the balance from fewer than 10 institutions and had to turn away some money, according to people with knowledge of the firm.

Bessent’s success in attracting money shows investors are willing to take a chance on managers with strong pedigrees and track records, even after several multi-billion-dollar macro funds, including ones run by Fortress Investment Group Inc. and Bain Capital, closed last year, primarily because of wrong-way currency trades. Chris Rokos, a former star trader at Brevan Howard Asset Management, raised more than $1 billion for his London-based firm that opened in October.

Key Square started with about 15 employees, according to one of the people, including nine from Soros Fund Management and three non-research professionals from Fortress’s macro fund. The investment professionals with ties to Soros include Michael Germino, Francis Browne, Greg Pappajohn, Charles Galbreath, John Roque and Bill Callanan, said the people. Bessent declined to comment for this story.

Bessent spent much of his career at Soros’s hedge fund. After graduating from Yale University in 1984, he did stints at Brown Brothers Harriman & Co., Saudi Arabian holding company Olayan Group and Jim Chanos’s Kynikos Associates before taking a job as an analyst for Soros in the early 1990s.

Returns to Soros

Soon after, he became the firm’s London-based portfolio manager as Soros fired his European team that had been struggling to make money. Bessent oversaw European investments for about eight years.

In 2000, he decided to strike out on his own after two of Soros’s lieutenants, Stan Druckenmiller and Nick Roditi, left the firm and the billionaire said he was cutting risk. He raised $1 billion for Bessent Capital Management -- including about $150 million from Soros -- and ran a global and European stock fund.

Bessent was in the process of starting a firm to make macro wagers when Soros asked him to return in September 2011 to be the chief investment officer. Under Bessent’s tenure as CIO, the family office has made about $10 billion in profit, or about 13 percent annualized.

Jack Meyer, the former head of Harvard University’s endowment, holds the startup record with his Convexity Capital Management, which opened with more than $6 billion in 2006. Druckenmiller’s former colleagues at Duquesne Capital Management started PointState Capital with $5 billion in 2011.
I've already covered investing in Soros's protégé and definitely think Scott Bessent has the pedigree and skills to become a great global macro hedge fund manager. However, I tempered my enthusiasm and think this is a brutal, BRUTAL, environment to start any hedge fund:...MUCH MORE, probably one of the few posts I would call a 'must read' for pros.
(I hate 'must read')