07/06/2011

Ex-Clinton Quant Chief Preps Equity Fund

Ellen Wang, who rang up 20%-plus returns as head of Clinton Group’s quantitative-trading program, is weeks away from launching her own hedge fund.

Since leaving George Hall’s shop in late 2009, Wang has been writing software, importing reams of stock-market data and building a staff of nine at her New York firm, Academy Investment. The plan is to begin trading on paper for a few weeks before soliciting capital from outside investors. At the very least, the fund would start out with $5 million to $10 million of partner money. A formal launch is planned for August or September.

Unlike most recent startups, Academy isn’t looking for seed capital. The expectation is that Wang will have little trouble attracting money from institutional investors, given her track record at Clinton and Academy’s investor-friendly terms — including 100% monthly liquidity with notice of just 30 days.

At New York-based Clinton, Wang managed as much as $1.8 billion, including leverage. Her strategy generated a 21.2% average annual return from 2005 to 2010. Even in 2008, when the average hedge fund lost 18%, her portfolio was up 22%.

In marketing Academy Quantitative Global Fund, Wang will extrapolate her Clinton returns through the end of last year in order to give prospective investors a fuller picture. It isn’t a matter of burnishing her image, since Wang’s 2010 return would have been about 11.3% — well below her average. She has consistently outperformed the benchmark HFRI Equity Market Neutral Index, which gained an average of 2.9% a year from 2005 to 2010. What makes Wang’s performance even more impressive is that she managed to produce outsized returns with relatively low volatility.

The Academy fund will make 5,000 to 10,000 trades a day, targeting mid-cap and large-cap stocks in the U.S., as well as mid-cap stocks in Canada, Europe and the Asia-Pacific region. Wang is focusing only on highly liquid markets in order to provide her investors with monthly liquidity. The fund will borrow up to two times equity.

Academy’s staff is heavy on programmers and researchers. It’s a relatively large operation for a startup, reflecting both the technology needs of a quantitative-stock fund and an infrastructure designed to appeal to institutional investors. Wang and her staff are still field-testing their strategy, which partly explains why they plan to begin trading on paper before committing their own money.

Wang, who serves as Academy’s chief executive and chief investment officer, was a mathematics professor at Oberlin College before joining Clinton Group in 1999. She took over as head of quantitative trading in early 2005 upon the departure of the firm’s former quant chief, Richard Cohen. One person familiar with Clinton’s quant book said that while Cohen developed the strategy, Wang “perfected” it.

Another ex-Clinton staffer, Harlan Simon, is now head of marketing at Academy. After leaving Clinton in 2008, Simon worked at XE Capital and Enso Capital. Jason Fletcher, who had been an in-house lawyer at XE Capital, is now general counsel and chief operating officer at Academy. Also on board is Donald Cambareri, who is working with Simon on the marketing side.

For the time being, Wang and her crew are based at Eze Castle Integration, a New York technology consulting firm that also runs a hedge fund hotel. Academy is getting strategic and marketing advice from North Creek Capital, which is led by Steve Bloom and Bruce Wilson. Bloom is a former chief executive of Sagamore Hill Capital.

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