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US hedge fund Schonfeld Strategic Advisors is cutting 15 per cent of its workforce in a cost-cutting drive after walking away from talks with larger rival Millennium Management earlier this week.
About 150 of the firm’s 1,000 employees were informed on Wednesday that they were losing their jobs, according to a person with direct knowledge of the situation. The cuts largely relate to non-investment roles in areas such as technology and back-office services, the person added.
Earlier this week Millennium, one of the world’s biggest hedge funds with $60bn under management, and Schonfeld, which manages $11.7bn, terminated months-long talks to form a partnership where the smaller manager would have run billions of dollars for the larger firm.
Alongside Ken Griffin’s Citadel, Izzy Englander’s Millennium and Schonfeld are among the most prominent multi-manager hedge funds, which allocate capital to specialist traders running a diverse range of strategies, overseen by sophisticated risk management technology.
A deal between Millennium and Schonfeld would have marked the largest of its kind in one of the hottest areas of the hedge fund industry.
But Schonfeld walked away from the discussions after its investors said they would give it about $3bn more to manage, helping it replenish assets. Investors had pulled more than $2bn since the start of the year.
The cuts partially reverse hires made during a period of rapid expansion.
Schonfeld began life in 1988 as a family office managing the money of founder Steven Schonfeld, a former stockbroker, and only opened up to external investors until 2015.
Since then its assets have grown significantly. As the multi-manager model grew in popularity with investors, Schonfeld was among those that picked up inflows when bigger managers such as Millennium and Citadel were closed to new money with long waiting lists to invest.
Schonfeld’s assets doubled in the past two years, from about $6bn to almost $12bn, and the firm embarked on an expensive hiring spree. Its headcount increased from about 600 to more than 1,000 in the same period.
But challenges arose when Schonfeld struggled to notch up the performance needed to support its higher cost base. While its record over the past three decades is behind only Citadel and Millennium, Schonfeld’s main fund gained 4.5 per cent last year and was up about 1 per cent between January this year and October, according to investors.
The multi-manager model is headcount-intensive and if assets decline, it is hard to cut spending at the same pace.
Schonfeld declined to comment. News of the job cuts were first reported by Bloomberg.