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The Employees Retirement System of Texas, which
invests roughly $28 billion, and PAAMCO Prisma, which built its
reputation on investing with new hedge fund managers, have
committed an undisclosed amount of cash to Cinctive. The leaders
come from shuttered hedge fund Diamondback Capital.
The investors agreed to lock their money up for multiple years,
the sources said, talking on the condition of anonymity. Their
investments will help Cinctive launch in the third quarter. The
firm is aiming to raise hundreds of millions of dollars, the
sources said.
Spokespeople for the pension fund, PAAMCO Prisma and the hedge
fund either did not respond to requests for comment or declined
to comment.
Cinctive may be one of the most prominent hedge fund launches in
2019, partly because the two managers previously ran Diamondback
Capital, which closed in the wake of an insider trading probe
several years ago https://www.reuters.com/article/us-usa-insidertrading-diamondback-idUSKCN0YP2AQ.
Since then, hedge funds have generally fallen out of favor
because of high fees and lackluster returns. But some
institutions are getting back in to help diversify exposures at
a time of growing concern over how long the stock market boom
can last.
Cinctive will compete with other multi-manager firms like
Citadel, Millennium Management and Point72 Asset Management.
New York-based Cinctive has hired 25 employees, one of the
sources said. It has 10 portfolio managers on board and may hire
up to five more before the launch, which could happen as early
as August.
Both Schimel and Sapanski worked for Point72's founder, Steve
Cohen, at his prior firm, SAC Capital Advisors. SAC pleaded
guilty to insider trading charges in 2013.
Diamondback's offices were raided by the FBI. The firm and its
founders were never charged with any wrongdoing.
Diamondback was founded by Schimel, Sapanski and Chad Loweth.
They returned an average 9 percent a year after fees over the
fund's lifetime. Diamondback charged a 2 percent management fee
and took another 30 percent of profits. The fund made money in
2008 and had only one year of losses, when it slipped 3 percent
in 2011.
After closing Diamondback, Schimel launched Sterling Ridge and
later worked for Citadel, while Sapanski ran Scoria Capital.
(Reporting by Svea Herbst-Bayliss; Editing by Lauren Tara
LaCapra and Leslie Adler)
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