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Hedge fund Millennium Management has sold a 15 per cent stake in itself to a group of investors at a valuation of about $14bn, the first time its billionaire founder Izzy Englander has parted with equity in the group’s 36-year history.
In an email to staff on Monday, the New York-based hedge fund said it had sold the “minority, passive equity interest in Millennium’s management company” to a group that included some of its largest institutional investors.
It did not identify the investors or confirm the valuation to staff, but a person familiar with the matter said the deal valued Millennium at about $14bn, as previously reported by the Financial Times.
The equity investments, which would be worth about $2bn for a 15 per cent stake, were made through funds managed by Goldman Sachs’ alternative asset manager Petershill Partners, which invests in hedge funds and private equity firms.
“This transaction is the latest step in our evolution and further positions Millennium for the future,” the email said. Millennium declined to comment.
Millennium is one of the pioneers of a multi-manager hedge fund structure, where hundreds of trading teams known as “pods” operate across markets rather than a few star traders.
The strategy has enabled Millennium to accumulate $79bn in assets under management and become one of a select few hedge fund giants that dominate the industry.
The stake sale is the latest move by Millennium to prepare for life beyond its septuagenarian founder.
As well as bringing in outside investors to the management company, senior staff at the hedge fund were also due to participate in the stake sale.
Millennium had already moved most of its fund investors into a longer term share class that increases the time it takes to withdraw capital to five years, similar to a private equity vehicle. The typical hedge fund might impose a redemption period of between a month and a year.
Although hedge fund performance can be volatile making them a hard sell for equity investors, multi-managers focus on providing consistent returns which has made them popular with large institutional investors.
Like other multi-managers, Millennium operates with a strict centralised risk control model to ensure none of its more than 330 trading teams loses too much money.
While the firm passes through most costs such as bonuses, technology and data directly to investors, it has also changed its fee structure so that investors pay even during years of poor performance. Annual fees on top of expenses are about 1 per cent of assets or 20 per cent of investment gains.
Taken together, these two moves make revenues more predictable for equity investors than an average hedge fund.
The firm had also been in talks with BlackRock to sell a stake in the hedge fund, the FT previously reported.
