| Illustration by Alex Fine |
Greg Coffey, The Australian-born trader once dubbed the “Wizard of Oz” because of his deft touch in the markets, is back. Whether he can still muster magical returns is another matter.
Coffey turned heads by ringing up returns of 135 percent in 2005 and topping 50 percent in 2006 and 2007 at London hedge fund firm GLG Partners, thanks to lightning-quick trades on economic, rate, and currency shifts across the globe. His pedigree includes a stint at a fund associated with George Soros, and he was the toast of the London hedge fund crowd. It was Coffey — not GLG’s founders — who rang the opening bell at the New York Stock Exchange for the hedge fund’s public listing in November 2007.
But shortly thereafter, Coffey stunned the financial world by leaving GLG — and a purse reported to be as much as $250 million — eventually joining Moore Capital Management, whose European headquarters were in the same Mayfair district office building. His 12-person team joined him, contributing to acrimony whose intensity was unusual even by the standards of London’s sharp-elbowed hedge fund crowd.
Moore founder Louis Bacon named Coffey co-chief investment officer of the firm’s European business. Bacon called him “one of the most impressive traders in the world.” But after the financial crisis, Coffey’s performance suffered at Moore funds. Volatility tapered off and global rates shrank amid bouts of quantitative easing. He publicly retired to Sydney in 2012 at age 41.
Since then macro funds have on average failed to post a double-digit calendar year return, according to Hedge Fund Research. They have lost money in four of the past seven years. And investors have pulled a total of $32.24 billion out of macro funds since 2012.
Now, filings with U.K. and U.S. regulators show Coffey starting a new fund, Kirkoswald Capital Partners, reportedly named for the avenue in Sydney where he lived for five years with his wife, Ania Brzezinski, and their children. Sydney is where Coffey grew up, graduated from Macquarie University with a degree in actuarial studies, got his investing start, and met Brzezinski, a financial analyst.
Investors are wagering on whether Coffey, five years after fleeing the hedge fund industry, can reclaim his storied pre-financial-crisis trading edge.
At least one person at Moore Capital suggests he can. In a statement, the firm said Coffey left the firm in good standing: “We wish him success in his new endeavor and Louis M. Bacon will personally invest in Greg Coffey’s fund.”
An endorsement from Bacon carries weight. “That’s worth a lot,” says Sol Waksman, founder of BarclayHedge, which tracks hedge funds. “He has a good idea of what it takes.”
Through a spokesman, Coffey declined to be interviewed or to cooperate. According to a person familiar with the situation, Kirkoswald will be a macro fund with an emerging-markets focus, building upon Coffey’s storied past.
The debut of Kirkoswald seems well timed. Rates are finally on the rise, market volatility is spiking, and last year emerging-markets hedge funds were up 19.45 percent, according to Hedge Fund Research.
“The end of [quantitative easing] is leading to greater dispersion in valuations,” says Michael Hintze, chief executive and founder of London–based CQS, in an email. “The change in market structure — algorithmic trading and reduced bank balance sheets — is bringing greater volatility. This is providing opportunity for smart traders such as Greg Coffey.”
According to government filings, a coterie of former Coffey colleagues and associates are joining him.
These include Abbeville Partners founding partners James Saltissi, a former GLG trader; Robert Price, also formerly of GLG; and Jeremy Power, formerly of Jabre Capital Partners; as well as Patricia Martin, who worked at both Moore and GLG and whose LinkedIn account identifies her as working in investor relations at Kirkoswald and Abbeville.
Coffey seeded Abbeville, which runs a European long-short equities fund, according to a 2015 hedge fund awards announcement. Abbeville is listed as an alternate name for Kirkoswald in U.S. Securities and Exchange Commission filings. Kirkoswald Capital is capped at $2 billion, according to the person familiar with the situation. It already has $3.5 billion in commitments, according to media reports.
As for Coffey reclaiming his exalted status — that is a tall order, as some of his trades are legendary.
A choice example: On July 7, 2005, according to The Australian newspaper, Coffey was on a phone call with another trader when news came of a power surge in the London Underground, disrupting service. The two continued talking. Soon there was a second announcement of another surge and Coffey yelled, “Bullshit!” into the phone — figuring that surges don’t occur in pairs, and that this was something different.
Coffey hung up and piled into U.S. Treasuries, sidestepping the market mayhem that ensued from the coordinated U.K. terror attacks that day, which killed 52 residents. (A spokesman would not confirm the accuracy of the anecdote.)
Stories like that will encourage some to give Coffey the benefit of the doubt going forward. “He made the perfect choice to leave and it was the perfect time to come back,” says Vidak Radonjic, founder of Beryl Consulting Group, which advises family offices on hedge fund allocations.
Others complain Coffey packed it in as markets turned unfavorable, when investors could have benefited from his skills. “[He] gave up as soon as he had a tough patch,” one rival European manager gripes in an email, declining to be identified. In other words, take care that Coffey’s yellow brick road doesn’t turn into a primrose path.
