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Hedge funds struggle in 2019

Stock market crash by over twenty percent has had its impact on the top funds.

“You have to be borderline crazy to be starting a hedge fund in this environment and the only way you should do it is if you feel you have something differentiated to offer,” said Ilana Weinstein, founder and chief executive officer of IDW Group, a hedge fund recruiter.

The lack of fanfare around this year’s newbies contrasts with several hotly anticipated startups in 2018 -- including Michael Gelband’s ExodusPoint Capital Management, which began with a record $8 billion in commitments, and Dan Sundheim’s D1 Capital Partners, which launched with about $4 billion. Investors and bankers say the number of inaugural funds in 2019 probably won’t exceed the 450 that started last year, the lowest number since 2000, according to Hedge Fund Research.

Funds face an uphill battle as investor uncertainty weighs in on the industry after most firms failed to make any money in the decade following the 2007 financial crisis. Last year alone $11 billion left the industry in the first three quarters, the second time in three years that funds have seen losses.

Woodline, this year's largest funded manager, is opening his third quarter and will focus on health care and technology stocks, according to people he knows.

Cragn PEskin and Peter Fleiss, employees of Jon Jacobson's Highfields Capital Management, are teaming up on a firm that is expected to open later next year with between $700 + million, according to their familiars.

Highfields, a Boston-based fund is shutting down after 20 years in business.

Olympus Peak Asset Management, headed by Westhus, will cap assets at $750 million, according to people familiar with the firm. It started with 12 people, including seven investment professionals.

Westhus worked for a decade with Richard Perry -- who ran a hedge fund for nearly 30 years before closing in 2016 -- focusing on distressed assets.

Other launches that are expected to be among the largest this year:

  1. Michael Phelps plans to start Tresidor Investment Management in the second quarter with 10 investment professionals. It will focus on European high-yield bonds, leveraged loans, convertible bonds and sovereign debt and is targeting to eventually raise $1 billion to $1.25 billion, not including co-investments, according to people familiar with the firm.

  2. Parsifal Capital Management, founded by former BlueMountain Capital Management equity portfolio manager David Zorub, is receiving a $150 million seed from Blackstone, according to people familiar with the firm.

  3. Lauren Taylor Wolfe is opening Impactive Capital. She previously worked at activist firm Blue Harbor Group and will focus on environmental, social and governance investing with an activist bent.

  4. Martin O’Hare, Marcus Strub and Richard Ford, former managers at David Fear’s Thunderbird Partners, will start Fosse Capital Partners, an equity hedge fund, in the second half of 2019.

  5. John Aylward, who managed about $300 million exclusively for Paloma Partners at his London-based credit fund Sona Asset Management, plans to open to other clients this year.

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