- Schonfeld Strategic Advisors, the $5.8 billion hedge-fund manager founded by billionaire Steven Schonfeld, is raising money for its Fundamental Equity Fund.
- Business Insider obtained a copy of the presentation the firm is sending to prospective investors.
- The 24-page presentation outlines the firm's focus and the fund's selling points, including its qualifications of the 52 portfolio managers that contribute to the $2.2 billion fund and the fees it charges.
- Visit Business Insider's homepage for more stories.
Schonfeld Strategic Advisors wants more money.
The $5.8 billion hedge-fund manager is in the process of raising more capital for its $2.2 billion Fundamental Equity Fund, according to a presentation sent to prospective investors obtained by Business Insider.
The presentation goes into detail on the make-up of both the fund — its expenses, structure, performance, and personnel — as well as the firm, which was founded by billionaire Steven Schonfeld and is currently run by CIO Ryan Tolkin and president Andrew Fishman. The firm declined to comment.
See more: Billionaire-run hedge fund Schonfeld fired an executive assistant who added 'Black Lives Matter' to her email signature, saying she didn't get it approved properly first
The presentation is 24 pages, and dense with information.
The firm breaks down the three different subsectors that its portfolio managers fall into — quant, fundamental equity, and tactical trading, which looks to take advantage of random market dislocations like index rebalancing — and where each of them fit in the firm's two funds.
Schonfeld has $5.8 billion in outside capital, including hundreds of millions from its own portfolio managers, across its two funds, the Fundamental Equity fund and the larger Strategic Partners fund. While Schonfeld has been investing and operating in the markets for decades, the firm only recently decided to take outside capital, in 2016.
In an interview with Business Insider in 2019, Tolkin, the firm's CIO, said that the goal was to become the premier equity manager in the world.
Driven by 52 portfolio managers, the fund's investment team headcount runs high
The Fundamental Equity fund, which was launched in 2016, has $2.2 billion of capital spread across 52 portfolio managers, and their teams. Forty-one of these teams are fundamental equity managers, while 11 are tactical trading teams; the Strategic Partners fund is the only fund that includes the quant portfolio managers' contributions.
The firm's diversified strategies help protect against one bad bet sinking the fund, but means the headcount on the investment team runs high.
Schonfeld, with its dozens of portfolio managers, has nearly 200 analysts, traders, PMs, and researchers. In total, the firm has more than 800 people working at it. For comparison, at Tiger Global, which manages $42 billion across different funds, less than 40 people work in investment roles, according to the firm's regulatory filing from March.
The firm touts its fundamental equity portfolio managers' backgrounds in the presentation to prospective investors: The most common resume pit stops are at Steve Cohen's former firm SAC Capital and current manager Point72 (12), Ken Griffin's Citadel(10), Izzy Englander's Millennium (8,) and the eponymous manager of Dmitry Balyasny (6), who used to work at Schonfeld.
See more: Inside the alumni network of billionaire Israel Englander, the founder of $46 billion hedge-fund behemoth Millennium
The presentation tries to sell prospective investors on the firm's ability to recruit and retain top portfolio managers. Schonfeld describes the terms it typically offers PMs — exclusivity for two to three years, on-demand liquidity, 15 to 20% of the profits earned for the fund — as well as the process to get hired.
The firm uses its existing portfolio managers and recruiters to get leads on new managers, and then the due diligence begins. The first stage of the process includes an independent assessment by each member of the firm's advisory committee, a back-test of performance, and a risk questionnaire.
Then a candidate will be asked for references, to construct a budget for their team, and give a vision on future hires while laying out how they come up with investment ideas. Then senior management still has to debate whether a new hire is worth the investment and finalize the deal.
"Why Schonfeld?" one slide's title reads.
"Talent Is Our Strategy."
Schonfeld's Fundamental Equity fund performance is up 6.7% this year but hasn't met the firm's goals
The fund's performance has been solid, according to the presentation: It has returned 6.7% through the end of September this year. The average hedge fund through the same time period was up roughly 0.6%, according to Hedge Fund Research. Previously, the fund has been positive every year except for 2016.
Still, it has not met the performance goals the firm lists in the presentation, which is to be positive at least 75% of the months it trades in. So far in the 51 months of performance Schonfeld is revealing to investors, the fund has made money in 36 of them — a rate of 71%.
The fund's biggest sector exposure is to IT companies, with 18% of the fund's portfolio invested in those companies, according to one slide in the presentation. Meanwhile, a majority of the fund's exposure is to American companies with Asian companies in a distant second. The firm has offices in Singapore and Hong Kong, as well as London, and is spread across the US. Portfolio managers work from typical places like New York, Chicago, and Los Angeles, as well as Dallas, South Carolina, and Florida.
A look at Schonfeld's fee structure
Investors have three different fee and lock-up structures they can access if they want into the fund, and there are some advantages for making a big bet on Schonfeld.
For those willing to put up a minimum of $25 million, Schonfeld's Class A shares charge investors a 2% management fee and 20% performance fee, but has no withdrawal fees and can pull their capital out at any time.
Class B and Class C, while offering management fees of 1.5% and performance fees of 15% and 12.5%, respectively, force investors to keep their money in the fund for a mandated stretch of time — one year for Class B, or pay a 5% withdrawal fee before the year is up. For Class C, the investment must stay in the fund for two years and investors would have to pay a 5% withdrawal fee if they wanted to pull their money out in the third year of their investment.
For the two latter classes, investors only need to put up $10 million, according to the presentation.
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