06/25/2014

LPs Eager to Back Ex-Highbridge Team

It looks like Pagoda Asset Management, a startup led by a former Highbridge Capital investment team, is on track to launch with more than $200 million.

Investors appreciate the fact that founders Adam Bernstein and Mark Hoffman, along with sector head Glenn Vogelman, spent more than six years working together at Highbridge before leaving the hedge fund giant in April to start their own fund shop. The team’s specialty at Highbridge — technology, media and telecommunications stocks, as well as consumer stocks — will be the focus of Pagoda.

“The coolest thing about these guys is it’s a lift-out more than a startup,” one source said. “The three of them worked together.”

Their debut fund is set to launch in the fourth quarter, with Bernstein serving as chief investment officer and Hoffman filling the role of chief operating officer. At Highbridge, a J.P. Morgan unit that was running $24.6 billion at the start of the year, Bernstein spent nine years as a portfolio manager, while Hoffman was global head of equity trading.

The portfolio Bernstein ran for Highbridge contributed the largest portion of profits to the firm’s long/short equity program last year, according to The Wall Street Journal, which first reported on Bernstein’s plans in March.

Highbridge’s hedge fund business has been in a state of flux since co-founder Glenn Dubin relinquished the chief executive’s title in mid-2013 and assumed the role of non-executive chairman. He was succeeded by Scott Kapnick, who is more of a private equity specialist.

In the past two years, Highbridge’s gross hedge fund assets have fallen to about $14 billion, from $17 billion, while assets managed in private equity vehicles have grown to $5.6 billion, from $3.6 billion.

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