12/03/2008

Millennium Seeding Outside Equity Funds

Even as it faces a flood of redemption requests, Millennium Partners is investing more than $1 billion of seed capital in three planned stock funds run by outside managers.

The New York fund operator, founded by Israel "Izzy" Englander, is expected to be the exclusive investor in the three funds, at least initially. Julie Macklowe, who recently lost her job at SAC Capital's Sigma unit, will launch a fund on Jan. 1 with $250 million from Millennium. Former J.P. Morgan proprietary trader Brian Pinsker is expected to receive up to $1 billion of seed capital. And Jon Cheng, formerly of Perry Capital, is in talks with Millennium for a deal that would fall somewhere between the other two.

Like Macklowe, Cheng and Pinsker recently lost their jobs as the financial markets collapsed. Cheng, a retail-stock portfolio manager, was laid off by New York-based Perry Capital in October, as Perry cut three-quarters of its equity investment staff. Cheng's fund, to be based in New York, will focus on the retail sector.

Pinsker, whose trading group at J.P. Morgan was shut down in September, has started a New York firm called 11:11 Capital to launch a healthcare-focused fund.

Macklowe, a consumer and retail-stock specialist, is setting up Macklowe Asset Management in New York. The fund will only manage Millennium money for at least a year before opening up to outside investors. At Sigma, part of Steve Cohen's Stamford, Conn., firm, Macklowe managed a similar-size portfolio from offices in New York.

Millennium is borrowing half of the $250 million it is putting into Macklowe Asset Management, and is believed to be using the same 50-50 leverage ratio to fund Pinsker and Cheng.

Macklowe was among several staffers laid off by SAC last month. She had been posting decent returns, and her departure apparently wasn't performance-related. She incorporated Macklowe Asset Management on Nov. 12, just four days after leaving Sigma.

This week, Macklowe's new fund is expected to sign Aaron Meyer, a senior consumer/retail stock analyst from Satellite Asset Management in New York. He was laid off last month along with the rest of the firm's equity staff. Salvina Vitale, who worked with Macklowe at Sigma, is joining the new fund as a research assistant.

Millennium is putting up significant amounts of seed capital and looking to expand its own investment staff at a time when its investors have asked to pull $1 billion from the $13.5 billion fund at yearend. Despite the redemption requests, Millennium is in relatively good financial shape, with its year-to-date loss around 3%, compared to double-digit losses for most of its peers.

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