How does a 33-year-old afford the $12 million home formerly owned by Lloyd Blankfein, head of Goldman Sachs?
The Financial Post recently tried to answer that question as it looked at the meteoric rise of Bryce Markus, a senior portfolio manager with BlueMountain Capital Management LLC. BlueMountain is a privately owned hedge fund sponsor, which is similar to a fund of funds manager.
Was it family money? Hedge fund profits? Connections? Turns out, it was all the above and more. Markus started out with a pedigree in finance. His father was an investment banking vice president in municipal finance at Goldman Sachs. His wife worked at Credit Suisse. After graduating from Wharton, Markus also joined Goldman, where he rose to vice presidents of Goldman’s Fixed Income Currency and Commodities Division. His current profile says he traded corporate debt and credit derivatives at Goldman.
While at Goldman, Markus met Alan Gerstein, a senior portfolio manager at BlueMountain, perhaps opening the door for his move into the hedge fund world.
At BlueMountain, Markus has managed structured credit strategies, a flagship investment vehicle at the firm. According to a description from HedgeWeek, BlueMountain manages US$4.5 billion across eight different absolute return funds and US$1.4 billion across three collateralized loan obligations.
Since hedge fund portfolio managers take home a small percentage of the total funds managed, having a large portfolio like BlueMoutain’s means more money at the end of the year for managers. Markus is also involved with the firm’s risk analytics, capital allocation and balance sheet management. More responsibility like this typically means greater compensation.
So it’s simple. To afford a $12 million home at age 33, it helps to 1) have connections 2) work at Goldman Sachs 3) be a portfolio manager at a fund of funds. And work hard. Any questions? Add your comments below.
Several high profile hedge fund managers have decide to throw in the towel and leave the industry, citing growing frustration over increased regulations, higher taxes on profits and disappointment with returns.
The latest is Stanley Druckenmiller, who managed $12 billion at Duquesne Capital Management, reports Reuters. His decision was reportedly due to “burnout”, after amassing a personal fortune pegged by Forbes at $2.8 billion.
He joins Renaissance Technologies’ founder Jim Simons who retired last year, and Highfields Capital co-founder Richard Grubman, who has told investors and colleagues that he plans to step down to focus on personal matters.
Many hedge funds have seen relatively flat returns in 2010. Flat returns mean smaller paychecks for hedge fund managers, especially on the 20 percent portion of their fee based on performance.
Of course it’s easy for a billionaire fund manager to cash out after earning their fortune. But what about other managers who may not have experienced the same level of success quite yet? Do you think these departures will make room for hungry, young hedge fund managers and others looking for hedge fund jobs to take their place? Add your comments below.
Hedge funds may benefit from money managers unhappy with the current direction of their big bank employers, reports the Financial Times. Many are once again thinking about leaving to start their own firms.
The reasons vary, from being forced to alter cherished and time-tested strategies that have worked for them, to being told to cut back on analyst resources to simply having to dance to the tune of a big parent company.
Hedge fund start-up activity slowed during the 2007-2008 financial crisis, with the pace of new investment start-ups falling from 70 in 2007 to 32 in 2009, according to data from eVestment Alliance. But the pace has picked up, due in part to improved markets and a greater willingness by large institutional clients to invest in a smaller firm with a good track record.
During the crisis, it was the old “nobody ever got fired for hiring IBM” tried-and-true approach. Institutional investors went for the safety of big name managers, regardless of their performance record. But recently, some of the bigger money managers have had lackluster returns, prompting a new interest in boutiques.
In fact, quantitative data from Northern Trust reveals that smaller managers earned higher returns with lower volatility during the five-year period ending in 2008, according to the Times article.
Many start-up firms are now big success stories, such as Turner Investment Partners, founded in 1990, with $19bn in assets; LSV Asset Management in Chicago, founded in 1994, managing $58 billion; and Oaktree Capital Management in Los Angeles, founded in 1995, with $76bn.
What’s your opinion? Do you think the financial environment has turned around sufficiently to make this a good time for starting a new hedge fund firm? Add your comments below.
