New Funds: Big Bets on Strauss-Kahn and Alumni of Baupost and Ziff

Suddenly everyone wants to run a hedge fund. The cast of startup managers and wannabes stretches around the globe, and prior experience doesn’t seem to be required.

In Europe, one of the most talked-about new fund initiatives is the one that Dominique Strauss-Kahn is preparing. The former head of the International Monetary Fund was at one point considered a leading French presidential hopeful until allegations of sexual assault involving a maid in a New York hotel derailed his political ambitions. Those charges were later dropped and he settled a related civil action. Now Strauss-Kahn is reported to be working on a new Geneva-based global macro fund that has been touted as a possible $2 billion launch.

One lesson that is very much in evidence among new fund launches this spring is that it takes a big name in finance or a strong track record in the hedge fund world to succeed at gathering assets.

In Singapore, meanwhile, Ng Kok Song, the former chief investment officer of GIC, Government of Singapore Investment Corp., the world’s eighth-largest sovereign wealth fund, is reported to be working on a new global macro fund that GIC might seed.

Investors with a taste for emerging managers will also find plenty of hedge fund veterans with high-profile launches in the works. Herbert Wagner left Boston’s Baupost Group to form Finepoint Capital in Boston, and estimates of his assets at his expected launch in May are running around $2 billion. Ziff Brothers alum Wui Yen Liow launched Aravt Global in February in New York with around $1 billion. A trio from Vinik Asset Management, the Boston firm that shut down last year, launched Shellback Capital in January with about $400 million. Another anticipated significant launch is Soros Fund Management vet Ahmad Zuaiter, who is expected to debut Jadara Capital Partners in Dubai in June.

While the biggest emphasis in new fund launches is on long-short funds that invest in U.S. equities, other parts of the world and other strategies are also getting a look.

“There is definitely enhanced interest in European markets and strategies on the part of investors,” says Robert Leonard, global head of capital services at Credit Suisse.

Lesser-known startup managers, however, continue to struggle with finding investors, even if the managers have solid backgrounds in other financial management realms.

Andrea Angelone is set to launch Amagis Capital in London in May as an event-driven fund focused on Europe. But while he was previously the global head of equity finance in London for JPMorgan Chase & Co., he has found it difficult to convert his background on the sell side into a buy-side hedge fund manager who appeals to institutional investors. Amagis has raised about $35 million.

Angelone says he expects to grow slowly by catering initially to family offices and high-net worth individuals. “We have avoided the more institutional type of investors,” he says. “There is no point in talking to them now because there is a reluctance to invest so far. We are a startup. We come from the sell side. We don’t have a proven track record on the buy side. They want to see a few months of performance before allocating.”

Scott Wallace, founder of Shorepath Capital Management in Chicago, tells a similar story. Previously he was the U.S. Large Cap Growth Portfolio Manager for Alliance Bernstein, where he managed more than $14 billion. He did a soft launch of his new long-biased hedge fund in February, 2013, with $5 million of his own money, and spent the next year establishing a performance record in a hedge fund rather than raising assets. He is now actively seeking new investors and has grown to about $10 million.

“People will talk to you prior to a year, but getting a commitment before a year is tough unless it’s your mom, and maybe that’s even difficult,” says Wallace.