Citadel Group has once again pounced on a team from a shuttered rival – its third such high-profile move in two years, as it added a 10-person team to bulk up its quantitative investing chops. And more team liftouts could be ahead for the hedge fund industry amid shop closures and the fight for top talent, industry watchers say. Citadel snapped up a quant team from Hutchin Hill Capital, which closed down late last year. The team led by Michael Urias, which was part of Hutchin Hill’s QuantOne unit, is now trading for Ken Griffin, as reported.
The move comes less than three months after Neil Chriss’ Hutchin Hill – which launched in 2007 with $300 million from Renaissance Technologies founder James Simons – announced its closure, as reported. That came on the tail end of several well-known 2017 closures, including Eric Mindich’s Eton Park, Hugh Hendry’s Eclectica Fund, and Whitney Tilson’s Kase Capital Management.
The last few years have seen increasing numbers of teams moving as a unit between hedge funds, far different from the industry’s high-performing days when firms would look to poach one star player, says Anthony Keizner, a partner at Odyssey Search Partners, an executive search firm. It’s the result of dislocation in the industry, with some firms returning capital and others shifting investment strategies – causing whole teams, especially ones with successful track records at shops that are underperforming, to look elsewhere, he adds.
I think this is a trend looking to continue, he says, noting that it is more widespread among fundamental long/short equity and event driven talent than with quant talent. “This separation of the winners and losers is set to exacerbate and continue. Many people feel the industry was overstaffed and had too many players and was ripe for consolidation, and as a result, you’re seeing firms leave the market. And it’s an environment where more and more people become available.
Citadel has now picked up several teams from beleaguered shops. Citadel grabbed a team of approximately 17 from Visium Asset Management in 2016, helping to form its Aptigon equities unit, as reported. More recently, the firm hired Allan Merrilland a small team from Eton Park last year, according to Institutional Investor.
Scooping up in-demand quant talent after a firm shuttering is a “straightforward situation,” says Adam Zoia, founder of search firm Glocap. “It’s a unique opportunity to pluck someone without the hang-ups,” he adds, mentioning the raft of non-compete clauses, some up to a year long, that make it difficult to poach needed quantitative talent in a shorter time span.
The demand for any talent that falls under the quant umbrella still remains “exceptionally strong,” with hedge fund managers still searching for expertise in artificial intelligence and machine learning, says Deepali Vyas, a senior client partner at Korn Ferry. For firms brining on teams, the biggest focus should always be on the culture fit and if a new group will be sustainable when absorbed into the firm, she says.
“I don’t foresee a lot of clients going this route unless it’s a very well-known entity and it’s a self-sustaining group and a plug and play strategy,” she says of Citadel’s move. “The majority of folks are doing builds versus buys for the most part.”