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HFA
July 20, 2016  

Promising Startup Struggles to Gain Traction

Scott Stevens is restructuring his Grays Peak Capital less than a year after getting it off the ground — a clear sign of the difficult fund-raising environment even for pedigreed managers.

As Stevens was setting up his technology-focused Grays Peak Master Fund last year, the expectation was that he’d have little trouble attracting day-one capital, given a resume that includes work at Coatue Management, JAT Capital and SAC Capital. But Stevens’ New York firm has little more than $25 million under management — and most of that is in separate accounts. Indeed, the master fund had just $6 million of gross assets in April, and Grays Peak already has liquidated an offshore feeder fund.

Two sources said Stevens plans to close the firm entirely and move his four-member team to a large fund operation — possibly Lombard Odier. But another source who is close to Grays Peak described the plan more as a restructuring, under which Stevens would join forces with one or more new equity partners to recapitalize the business. The deal is expected to close within three to four weeks, that source said.

In marketing Grays Peak, Stevens emphasized his experience working as a researcher under Coatue founder Philippe Laffont and, later, as a portfolio manager at Steve Cohen’s SAC and John Thaler’s JAT. But the early performance of the Grays Peak fund may have fallen short of investors’ expectations.

In the last three months of 2015, the master fund rose 6.5%, while the separate accounts were up 7.7%. But this year, both the fund and account program were under water at the end of May. With net market exposure of about 15%, the fund was down 3.9%, while the accounts were down 2.1%. The lower net returns of the fund reflect higher expenses.

Stevens’ team includes head-of-research Brian Blair, who got his start working under famed tech-stock analyst Frank Quattrone at Credit Suisse, and chief financial officer and chief operating officer David Gerber, whose resume includes stints at Daruma Capital, Great Point Partners and LRL Capital.