Brookfield Asset Management is expanding its hedge fund business in Europe, as the Canadian investment group bets on a trading strategy that has generated stellar returns for some of the biggest names in the industry during the pandemic.
The Toronto-based Brookfield Hedge Fund Solutions Advisors is a multi-strategy unit that trades in areas such as neutral and event-driven equity markets, a profitable sector of the industry dominated by Citadel and Millennium Management.
So far, the low-key firm, which manages around $1 billion in assets, has based all of its business teams in New York. But it is now opening an office in London for its hedge fund business and has started hiring, according to people familiar with the matter.
He has recruited William Rushmer, a former partner at Mayfair-based investment firm CZ Capital, to run a long-short UK equities strategy in London, and plans to grow the business further, one of the people said. .
The move by Brookfield, which manages around $650 billion in assets globally and is best known for its real estate, infrastructure and private equity investments, will increasingly pit it against some of the biggest names. largest and most established in the multi-manager hedge fund industry.
These funds, which employ tens or even hundreds of small teams of traders, have enjoyed a period of strong performance and attracted billions of dollars from investors.
Ken Griffin’s Citadel, which manages $43 billion, gained 26.3% last year and made money across credit, commodities, stocks, fixed income and macro strategies and quantitative. In 2020, it made 24.5%.
Izzy Englander’s Millennium Management, which has $52 billion in assets, gained about 13% last year, after returning 25.6% in 2020, its best performance in two decades, while Point72 and Balyasny’s Steve Cohen also made gains last year.
The funds were helped by their asset diversification, their ability to quickly reduce risk if conditions deteriorate or fire underperforming managers, and sharp price swings in areas such as commodities.
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Data group eVestment noted that “2021 will go down as a year dominated by multi-strategy hedge funds”, noting that the bulk of the hedge fund industry’s inflows last year went into this sector.
These funds, which often give trading teams autonomy within strict risk limits, gained 10.5% on average last year, according to eVestment, just ahead of the average gain for the entire industry. Many investors favor these funds due to their low volatility of returns and ability to earn money even when managing a large asset base.
The success of these funds during the pandemic has led to a fierce battle for talent, which has sent top traders’ payouts skyrocketing. Payouts just to compensate top traders when they leave a rival, for example, can now be as high as $10 million and sometimes as high as $20 million.
Brookfield’s hedge fund business, led by New York-based Jason Siegel, started making money in 2019.
The Canadian group as a whole has been investing in Europe for almost 20 years. Its assets in the region, which include real estate, infrastructure and renewable energy, have grown from $6 billion in 2013 to around $110 billion.
Brookfield declined to comment.