03/21/2012

Family Office Builds Out Hedge Fund Business

Fairhills Group, a family office that’s repositioning itself as a hedge fund operator, has signed up managers for its first two investment teams and has a third team waiting in the wings.

The White Plains, N.Y., firm views the business as a kind of fund “incubator.” Fairhills plans to seed each vehicle with $5 million to $50 million of startup capital, offer a full complement of support services and market the offerings to outside investors under the Fairhills banner. The firm will pocket a 2% management fee along with a slice of the performance fees the funds charge — typically 20% of gains.

Fairhills founder Edward Bronson will fund a portion of the seed investments, with the rest of the capital coming from outside investors.

The first two managers in the door are Daniel Glickman and Luke Smith. Each plans to launch a quantitative-equity fund by yearend.

Glickman, most recently a portfolio manager at New York Life, will run a book that invests in companies in the Russell 2000 Index. His resume also includes a stint at Cantor Fitzgerald, where he helped develop proprietary-trading and market-making systems for Cantor Futures Exchange.

Smith’s fund will focus on European stocks. He previously worked at New York Life unit Madison Square Investors, and before that managed quantitative portfolios at Gartmore Investment and Putnam Investment.

Meanwhile, Fairhills plans to hire a team of two portfolio managers and six support staff who previously worked together on a bank proprietary-trading desk. The firm’s marketing staff already has lined up a sizable commitment for their vehicle, which is expected to launch in the fourth quarter.

Beyond that, Bronson wants to bring on 7-10 portfolio managers who trade commodities. He said he’s targeting “proven portfolio managers and prop-desk traders who are now being forced to leave their jobs because of the change in [regulations]. We’re putting them in an environment where they can re-create their own strategies, and then our marketing team will raise capital.”

The marketing effort is led by David Benway, who joined the firm in August 2011. He previously worked at Vision Capital Advisors. He began his Wall Street career at Goldman Sachs in 1992.

Fairhills continues to pursue its core strategy, which is making private investments in struggling public companies. Since 2002, the firm has made more than 1,000 such investments in 219 companies.

Until 2009, Fairhills managed money for outside investors. But the financial crisis prompted a pullback, during which Bronson focused on managing his own money.

Now, in addition to building a multi-strategy hedge fund operation, Fairhills is marketing Fairhills Capital Offshore Opportunity Fund, which focuses on the firm’s core strategy. That vehicle has about $25 million of equity.

Back Print