Multi-managers and capital lock-in for portfolio managers
For example, Quantbot supposedly has a 10 year contract with Schonfeld.
How common is it for PMs to obtain something like a 5-10 year capital lock-in from an MM platforms. Also, how would this work if the PM under-performs? I know it sounds ridiculous but apparently they do exist.
I have never heard of something like that before, but I have only been at a MM for around 2 years and was at a large SM for a large number before that so my data points are probably limited.
I would think that type of contract would seriously impair a MM's ability to enforce strict DD limits and therefore degree of leverage.
Yeah, heard that before. Albeit not sure about the logic. Unless you’re desperate for talent.
In general an individual PM at an MM will not get an x year lock in. I could only imagine this in very specific cases. As I understand it Quantbot is an independent firm. They seem to manage Schonfeld capital, but can also manage external capital. So this is more like Schonfeld is seeding Quantbot, in my understanding and in such a case a lock in is quite standard. Similar as Millennium is doing with Worldquant, I would say.
I am guessing that such arrangements might not actually have a capital lock-in. We really have no idea what the contract covers. Perhaps the agreement is to provide for the PM's operational costs only or perhaps there are exit clauses built-in.
Seems foolish that an investor would be willing to get locked in like this given the failure rate.
I’ve heard of highly courted managers getting a 2-3 year lock in of some portion of Capital at Schoenfeld. At other multi multi managers, it seems they court you with higher payouts or a big signing bonus. It’s a pretty efficient market I’m sure there’s all kinds of caveats to lockup
That’s the only place I’ve heard of that set up as well at MMs,
Schonfeld suffered from double digit loss back in March. Wonder if they sticked to the existing teams or has turned positive for the year.
Apparently they raised money recently. Sign that they recovered perhaps?
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