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Eisler Capital is planning to raise between $1bn and $1.5bn of capital from investors and hire up to 25 portfolio managers this year as the fast-growing UK hedge fund muscles into one of the hottest parts of the industry.
The London group’s plans include raising more funds from investors — only a year after increasing assets by more than $1bn — and taking its number of portfolio managers to about 120 or 125, according to a person familiar with the matter.
Eisler’s rapid expansion underscores the war for talent among so-called multi-manager hedge funds, as large institutional investors such as pension funds seek out consistent returns and more extensive risk management, rather than big gains in one year and a loss in the next.
Multi-managers, which include giants Izzy Englander’s Millennium and Ken Griffin’s Citadel as well as Eisler, employ teams of professionals trading a wide variety of strategies, diversifying the fund against market losses.
Traditional hedge funds may have only a couple of portfolio managers trading a specific strategy, supported by a few analysts.
Multi-manager assets increased by 150 per cent in the five years to 2022 while the rest of the industry grew by just 13 per cent in the same period, according to Goldman Sachs estimates.
Eisler, which only started its multi-manager fund in 2021 and has grown to manage $4bn of assets, was founded by former co-head of Goldman Sachs’ global markets division Edward Eisler. It has about 300 staff globally and trades a variety of strategies in bonds, equities and commodities markets.
Eisler posted a 9.8 per cent return last year, beating many of its rivals and returned 15 per cent in 2022. Notable large hedge funds that underperformed last year include US-headquartered Balyasny and Schonfeld, whose main funds were up 2.7 per cent and 3 per cent, respectively.
Eisler’s plans for 2024 include expanding trading in equities and commodities, and to scale its quantitative trading strategy business, in which computer models trade based on market signals, a person familiar with the matter said.
Some of the hires will be for its equity long-short business, in which portfolio managers buy companies they think will outperform the market, while simultaneously betting against lower-quality companies. The firm this year hired Jeff Russel, a former portfolio manager at Balyasny, to lead this strategy.
Investors have been drawn to multi-manager funds because they offer tighter risk management, intervening quickly when their portfolio managers begin to lose money, in a bid to limit losses. Fuelling their growth is the sector’s fee structure, which passes through all costs of the fund to investors rather than charging a management fee.
However, investors have been disappointed by their performance last year and the high fees charged by many multi-manager hedge funds, prompting concern that the war for talent has resulted in overall costs spiralling out of control.
A study from BNP Paribas of 238 hedge fund investors showed that hedge funds that charge traditional management fees delivered returns of 7.88 per cent after those fees were taken into account. Hedge funds that use the pass-through model only delivered 5.98 per cent net of fees, the first time in three years they lagged behind peers.
This article has been amended since publication to correct Jeff Russel’s former role at Balyasny.