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Updated Feb 1, 2024, 9:20pm EST
business

Fundraising is tough. Just ask this hedge-fund star.

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The Scene

Since Bobby Jain left his hedge fund job to hang his own shingle after decades of minting money for others, Wall Street just watched and waited for the money to follow him. They’re still waiting.

Expectations of Jain’s fundraising target has steadily, if quietly, shrunk from $10 billion to perhaps half that, and the firm is looking to hire more star traders before its July launch, according to people familiar with the matter.

At resort hotels up and down Palm Beach and Miami Beach this week, talk regularly turned to Jain, who spent more than 20 years at Credit Suisse and seven at Millennium Management, which flagged in late 2022 Jain would be leaving, during a second golden age for hedge funds. The perception — confusing to many who’d envied Jain’s magic touch for years — was of an industry giant passing an empty hat.

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Money once flowed into funds founded by big name portfolio managers at big name funds striking out on their own, like Jain’s fellow Millennium defector Michael Gelband, who launched ExodusPoint Capital Management in 2018 with $8.5 billion under management. But things have changed.

Investors pulled more than $100 billion out of hedge funds in both 2022 and 2023, and the average shop returned about half the S&P 500. And Jain is trying to hire in the shadow of established multi-manager giants — known as “pod shops” — like Millennium, Citadel, Point72 and ExodusPoint.

Meanwhile, The Financial Times reported that Jain has cut his performance fees to 10% for investors looking to funnel more than $250 million, and has steadily lowered his fundraising goal.

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Know More

Pod shops are finance’s version of The Borg from Star Trek, a hive-mind organism in which competing traders serve the larger collective. A manager — here, Jain, raises money and doles it out on terms only he knows to investing teams running their own angles. Those who make money are rewarded with more capital to trade, which means more fees to collect. Those who lose money threaten the health of the collective and are usually fired.

That structure requires, even more than investor dollars, a constant stream of top talent. LinkedIn profiles show about 50 people now working at Jain Global, though another 30 or so are committed but still legally tethered to their old jobs for now, a person familiar with the firm said. ExodusPoint added 35 portfolio managers last year alone.

Jain’s star power was enough to make many of the pension funders, sports investors, Hollywood financiers, and family-office managers hanging out poolside at The Breakers, The Fountainbleau and The Loews Miami Beach eager for a chat, even if some of his fellow asset managers remained skeptical.

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Millennium
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Thornton’s view

Jain would have been shooting fish in a neon barrel two years ago, when there seemed to be no bad ideas and attendees of Miami Hedge Fund Week spent their sunny days talking about cryptocurrencies, NFTs, and the metaverse. But with interest rates topping 5% and very few hedge funds beating the market, allocators are now thinking differently.

Jain in 2024 also is suffering from an unrealistic apples-to-apples comparison to ExodusPoint in 2018. Millennium founder Izzy Englander was infamously displeased when Gelband founded his not-so-subtly named ExodusPoint, but Gelband managed to pull some talent and investors from his former mentor and still raised $8.5 billion.

The perception that Jain, who is widely liked in the industry (a very rare thing) and not as much of a public apostate as Gelband, would raise more than $8.5 billion has created expectations that Jain would set a new record launch at $10 billion. But Englander is not handing talent over to his most recent ex-CIO, and Jain wasn’t allowed to start raising from Millennium clients until Jan. 1, which might explain why he was in attendance at Morgan Stanley’s invite-only event at The Breakers this week, meeting with as many as he could at once.

“His timing is not great,” said one asset management marketer calling poolside from the Loews Miami Beach. “Things are different now. I’ll put it this way; Gelband wasn’t down here raising for Exodus Point.”

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Room for Disagreement

While competition might be fierce for now, Jain is entering a shrinking hedge fund scene. According to data from Hedge Fund Research, an estimated 449 funds launched between the third quarters of 2022 and 2023, while an estimated 455 funds liquidated.

“People like Bobby,” said one hedge fund executive in Miami this week. “He’s getting big meetings down here. You never know, but maybe he comes out of here with a different story to tell investors.”

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Notable

  • Bloomberg laid out the brutality of the pod shop model in this piece on Millennium.
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Correction

An earlier version of this story misstated when Bobby Jain left Millennium. The hedge fund said in late 2022 Jain would be leaving and he departed in 2023.

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