08/18/2010

Englander Brushes Aside Millennium Exits

Recent staff turnover at Millennium Management has led to speculation that Israel "Izzy" Englander is downsizing his firm amid shrinking assets, but insiders said the departures are more about performance than cost-cutting.

Among the latest investment staffers to leave is consumer-stock portfolio manager Matthew Karchmer, who worked for a Millennium unit called Green Arrow Capital. He left last month for a job as a portfolio manager at D.E. Shaw. In the wake of Karchmer's departure, Millennium laid off his deputy, Richard Wang, about three weeks ago. There's no word yet on Wang's next move.

Meanwhile, analyst Effie Veres last week departed from another Millennium unit, Macklowe Asset Management. Veres worked directly for Julie Macklowe, a former SAC Capital portfolio manager who joined Millennium in late 2008. Like a number of other Millennium portfolio managers, Macklowe operates under her own banner but trades exclusively for Englander.

While Veres' destination is unknown, another former Macklowe analyst, Aaron Meyer, is expected to resurface soon at RBC Capital Markets. Meyer was laid off by Millennium last month.

Another portfolio manager, Mike Keohane, who worked for a Millennium unit called Catapult Capital, left the firm 2-3 months ago. He had been running a book of consumer stocks totaling $400 million to $500 million. There's no word yet on his plans.

Because Millennium's assets under management have slipped to just over $7 billion, from a peak of $13 billion in early 2008, some market players have said Englander has no choice but to "right-size" the firm - that is, cut staff and other expenses in line with the reduction in fee revenue. The firm, which is headquartered in New York, employs 790 people.

But Millennium doesn't charge a management fee. And because its 2008 loss was relatively small - a little more than 3%, compared to 19% for the average hedge fund - it has been able to continue charging performance fees. Millennium gained 17.3% last year and was up about 4% this year through July.

The decision to cut a portfolio manager is based only upon his or her performance, said a person familiar with Englander's thinking. "If you're not performing, you're gone," he said. "You perform, you stay."

Despite the decline in assets under management, Millennium hasn't stopped hiring. Indeed, since the start of this year, the firm has added 15-20 trading teams, boosting its headcount by 50-60 staffers. Among the latest recruits: Analyst Sayan Ghosh joined last month from Citadel's global-equities unit, where he focused on raw materials. On Nov. 1, former Diamondback Capital portfolio manager Mina Guiahi will come on board to trade a book of retail and consumer stocks.

Millennium's stable of portfolio managers includes both inside staffers who work under the Millennium banner and independent managers, such as Macklowe, who run money only for Millennium. Englander allows certain managers to maintain their own identities so they are viewed as independent by their Wall Street counterparties.

Englander's personal wealth accounts for about 20% of the equity capital in Millennium's two main vehicles, the U.S.-domiciled Millennium USA fund and offshore Millennium International fund.

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