Ziff Brothers Investments, the multi-billion dollar family office hedge fund that invests the family fortunes of the three billionaire brothers is shutting down according to Wall Street Journal. The move to close the last of their two hedge funds is a result of a growing difficulty in coming to a consensus in decision making among the brothers who have developed stronger views on their interests over the years. The recent lackluster performance of the fund which adopts a market neutral strategy by betting on and against stocks, and thereby seeking to have no net exposure to the stock market, also contributed to the fund closure.
Ziff Brothers Story
The brothers Dirk aged 50, Robert, 47, and Daniel, 42 are grandsons of Ziff Davis Media founder William Ziff, Sr., who co-founded the publications business named Ziff Davis Inc way back in 1927. The brothers’ father, William Ziff Jr., took over the business in the 1950s and after several successful years of operation, sold it for $1.4 billion in 1992 as his sons were not keen on continuing the publications business.
The brothers set up the family office hedge fund in 1992, and in the same year provided seed money to hedge fund manager Daniel Och whose firm Och-Ziff Capital Management bears the Ziff family name. In return, the brothers received 10 percent stake in Och-Ziff Capital, which eventually went public in 2007. The Ziff brothers have been reducing their stake in Och-Ziff Capital over time and now own less than 10 percent.
The family office also has a history of backing several other well-known hedge fund managers including activist investor William Ackman, James Chanos, and Richard Perry.
One for All, All for One Investment Style
For over two decades, the three brothers, each of whom have a net worth of about $5 billion, followed a one-for-all, all-for-one investing style. This consensus-driven approach to investing has become a barrier to investment decisions in the recent past as the brothers now have stronger views on their interests compared to their early years. The closure was also prompted in part by the weak performance of its funds which have been significantly lagging the broader S&P 500 index in recent years. Last year, S&P 500 gained 32.4% while market neutral hedge funds had average returns of only 6 percent.
As a result, the Ziffs closed their New York hedge fund last fall triggered by the decision of its longtime portfolio manager Ian McKinnon to retire. Now within a short span of a few months the hedge fund is winding down its London operations also.
Going forward, in a shift from their consensus-driven approach, the Ziff brothers plan to make investments independently of one another. There may still be a few joint investments but the shift is towards investments independent of each other.
In recent years, the firm’s hedge funds together managed between $5 billion and $10 billion and employed around 300 to 400 people. The brothers plan to invest in a new investment firm launched by the head of their London hedge fund operations. In addition, the brothers are looking to seed new hedge funds being started by other former Ziff Fund employees.
Relevance to Job Market
The news of the Ziff brothers closing their operation doesn’t impact the job market beyond the few hundred jobs that would be lost as a result of the shutdown. But beyond that it shows that certain hedge funds which have been in operation for a while are seeing a need to alter certain key elements of their investment style to succeed in today’s market.