JANUARY 20, 2021 Banner Year for 2 Multi-Manager Stalwarts

Two of the industry’s oldest fundamental-equity funds of funds proved their

2 Confluence Off to Dazzling Start mettle last year in a volatile market that rewarded savvy stock-picking.
Fundana, a Geneva shop founded in 1993, posted a 19.9% return for its flagship
2 Industry Critic Launches Hedge Fund Prima Capital Fund, compared with a 10.3% increase in the HFRI Fund of Funds
Composite Index. That helped lift the firm’s overall assets to a high of $1.3 billion,
3 Connacht Beats Market Out of Gate
up from $980 million at yearend 2019.
3 Atalaya Buys Stake in Direct Lender A.W. Jones & Co., founded in 1949 and considered the first hedge fund manage-
ment firm, shows a 2020 gain of 27.1% for its flagship vehicle. That was the fund’s
4 Hedge Fund Team Splits From CPMG strongest showing since it popped 34.8% in 1999 amid the dot-com bubble.
4 Quantix Tees Up Dual Offerings The New York firm now runs $567 million, up from $475 million at the end of
July. Sources said A.W. Jones recently signed on a foundation in the Middle East as
5 DGV Pitches Revenue-Sharing Class a limited partner and is in the process of finalizing a “significant partnership” with
See BANNER on Page 6
5 Connective Joins 2020’s Big Gainers
6 BlockFi Enters Crypto Trading Biz Embattled Fund Picker Maps New Offering
7 Element Sees Supercharged Recovery Prophecy Asset Management is laying the groundwork for a new vehicle, even
as the multi-manager shop continues to grapple with investor complaints over an
8 Risk-Transfer Bets Aid 400 Capital
allocation to an alleged Ponzi scheme.
8 LATEST LAUNCHES On Jan. 5, the New York firm notified the SEC that it had begun marketing a
vehicle dubbed Scalebuilder Allocation Format. The timing of the fund’s launch is
unclear, as is its investment strategy.
The manager’s flagship fund, Prophecy Trading Advisors, employs a so-called first-
THE GRAPEVINE loss strategy in which it invests with both new and established portfolio managers on
the condition that those individuals personally absorb an initial layer of losses from
Verition Fund Management has hired a their trades. In March 2020, the firm suspended redemptions from Prophecy Trading
portfolio manager to oversee relative- Advisors after one of its underlying managers, Broad Reach Capital, was accused by
value credit investments. Julian Pomfret- federal prosecutors of running a $100 million-plus Ponzi scheme.
Pudelsky joined the Greenwich, Conn., Since then, questions have swirled about the future of Prophecy. There’s been
multi-strategy firm this month after See OFFERING on Page 8
working at Credit Suisse since 2013,
most recently as global head of credit
algorithmic trading. Pomfret-Pudelsky’s
Hope Not Lost for Mortgage-Agency Play
earlier employers include UBS, Deutsche Hedge fund operators haven’t given up all hope of profiting from the removal of
Bank and law firm Davies. Verition, led Fannie Mae and Freddie Mac from government conservatorship.
by chief executive Nicholas Maounis and As the Trump Administration fast-tracked efforts to recapitalize the mortgage
president Josh Goldstein, has $2.7 billion agencies last year, several managers built equity positions that they saw as likely to
under management. Its flagship Verition benefit from that process. But the outlook for those plays dimmed as it became clear
Multi-Strategy Fund, which has never that the privatization push would not gain traction before today’s inauguration of
had a down year since inception in 2008, President Joe Biden.
finished 2020 up 30%. The odds of a near-term exit also shrank when the U.S. Treasury Department said
on Jan. 14 that it was looking at a timeline under which it would take years for Fan-
A London-based portfolio manager has nie and Freddie to build up the capital needed to exit government control.
returned to Millennium Management. But fund operators still think the U.S. Supreme Court could offer a lifeline via the
Stephane Fischhoff arrived this month case of Collins v. Mnuchin. That case, initiated by Fannie and Freddie sharehold-
to cover short-term systematic macro ers, challenges the constitutionality of the Federal Housing Finance Agency on the
investments at Millennium, where he basis that the regulator is controlled by a single director who can be removed by the
See GRAPEVINE on Back Page See HOPE on Page 7

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January 20, 2021 2
Hedge Fund
ALERT

Sharpe ratio of 10. It also had no down months, and its maxi-
Confluence Off to Dazzling Start mum daily loss was just 1.7%.
Opportunistic proprietary-trader Confluence Global Capital The firm was up a gross amount of 14.1% in March and
is laying the groundwork to take in outside capital after gaining 27.2% in April, demonstrating downside protection as the pan-
triple digits in the startup’s first 12 months. demic rattled economies around the world. Ross and his team
The New York firm started trading with $25 million of part- finished the year with gross gains of 13.4% in October, 20.7% in
ner contributions in January 2020 and went on to record an November and 12.7% in December.
unlevered, gross gain of 155.4% through December. The show- Industry participants called the result impressive, at the
ing translates to a 122.2% net increase. same time cautioning that such outsized gains will be much
While Confluence’s total assets are unknown, it plans to more difficult to achieve with similarly low volatility as the
accept its first limited partners once its proprietary capital firm’s asset base grows.
increases to $150 million. How long it will take to reach that Ross has been pitching the idea that Confluence specializes
threshold hinges on the firm’s performance. in grinding out risk-adjusted returns, like other multi-strategy
The end goal for Confluence is to create a multi-manager fund operators.
model. The firm’s managing member, former First New York “To employ a baseball analogy: rather than strive to hit
partner Andrew Ross, is looking to combine in-house traders home runs, we strive for a high batting average in order to pro-
with limited-partner exposures to outside hedge fund manag- vide a more stable and consistent return profile,” Ross wrote.
ers, as well as private equity-style fund investments and related “We hate losing money far more than we enjoy making it and
co-investments. consider our trading processes to be inherently less risky than
Ross formed Confluence in July 2019 with partner Craig more concentrated and static investment philosophies.”
Gorman, a fellow first New York alumnus. The two have since Quantitative algorithms that use alternative data sets add a
shaped the firm’s operations and trading strategies. The build- high-frequency element to many of the firm’s trades. Indeed,
out included the February 2020 hire of Brooks Barge, also from the proliferation of money managers turning to alternative
First New York. data now fuels the price of a given financial instrument more
The startup’s investment team now has nine staffers, with than ever before, Ross wrote.
more hires in the pipeline. Indications are that Confluence has “We believe the proliferation of this real-time data, com-
identified a commodities trading-team that it plans to bring on bined with market participants’ unabashed impulse to thrust
board in the first half of 2021. asset prices in whatever direction this information dictates,
Confluence currently invests in outside managers via an has ushered in a new regime of short-termism and short-term
internal fund of funds called Confluence Global Capital Part- price dislocation,” he wrote.
ners Fund. Barge, a Confluence partner, heads that effort. Before forming Confluence, Ross ran his own family office in
The infrastructure for incoming Confluence investors is still New York. Before that, he spent more than 13 years in increas-
under development. In addition to the fund of funds, Con- ingly senior investment roles at First New York. 
fluence would offer limited partners exposure to its in-house
strategies via additional vehicles and separate accounts.
Those market-neutral strategies include trading a highly
Industry Critic Launches Hedge Fund
diverse mix of assets on more than 50 exchanges around the Noted hedge fund critic Simon Lack has begun incubating
world. There is a heavy quantitative component to many, but a hedge fund.
not all, of Confluence’s trades. Wagers include stocks, foreign- Lack, who for years provided seed and acceleration capital
exchange instruments, cryptocurrencies and commodity to hedge funds as a J.P. Morgan executive, only to later knock
futures ranging from electricity to metals and grains. the industry for what he called its high fees and meager returns,
The idea is to “identify short-term price inefficiencies that said he formed the new fund because he secured a commit-
drive unmatched results,” Ross wrote in a letter sent today to ment from an accredited investor not affiliated with his invest-
prospective investors. The approach is often manifested in ment advisory firm, SL Advisors.
quick trades that play out in niche, under-the-radar markets. That required him to submit a Form D regulatory filing with
The majority of those trades are based on a catalyst that Conflu- the SEC. He did so on Jan. 12, classifying the vehicle as a hedge
ence has identified. The strategy employs elements of global- fund.
macro investing, along with arbitrage plays. Lack’s Low Vol Hedged Fund runs an equity strategy simi-
The fund of funds recently did due diligence on an undis- lar to one he employs in a separate account at his Westfield,
closed manager that specializes in investing in cattle as a N.J., firm. Through the separate account, Lack invests in div-
commodity. Confluence also has explored the viability of a idend-producing stocks while taking a short position in the
quantitative strategy that would bet on the outcome of sports S&P 500 Index. The strategy, a substitute for a portion of an
games via Nevada gambling operations. investor’s fixed-income allocation, lost 11.6% in the first 10
Perhaps as notable as Confluence’s 2020 gain is the fact that months of last year — the latest data available — compared
the firm achieved it with minimal volatility in especially frothy with a 6.5% loss for the HFRX Equity Market Neutral Index
markets. Confluence finished the year with a standout average See CRITIC on Page 5

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January 20, 2021 3
Hedge Fund
ALERT

He previously worked at Armistice Capital, with earlier

Connacht Beats Market Out of Gate stops at firms including Tourbillon Capital, Visium Asset Man-
Startup Connacht Asset Management is set to surpass $150 agement, Diamondback Capital and Circle T Partners.
million of assets after a strong 2020. Connacht has a staff of 10, including six investment pro-
The New York firm’s flagship Connacht Equity Long/Short fessionals. Among them are two more Goldman alumni:
Fund was up 42% over 11 months last year, more than dou- healthcare-stock portfolio manager Peter Rominger and ana-
bling the full-year 20% increase in its benchmark, the Rus- lyst Dylan Emmett.
sell 2000 Index. Rounding out the team: chief operating officer and chief
Connacht invests in stocks in the consumer, financial, compliance officer John Larkin, chief financial officer Veron-
healthcare, technology, media and telecommunications sec- ica Farley, chief administrative officer Priya Dvivedi and
tors. The fund focuses mainly on small- and mid-cap U.S. operations manager Don Mimnaugh.
stocks, but it sometimes will take positions in large-cap and Connacht’s chief data advisor is Jon Neitzell, who serves
non-U.S. companies. as a consultant to the firm. 
The firm is led by former Goldman Sachs Asset Manage-
ment executive Sean Gallagher, who spent about 18 years at
the bank, most recently as co-chief investment officer for its
Atalaya Buys Stake in Direct Lender
U.S. equity business. He also headed Goldman’s value-equity Debt-fund manager Atalaya Capital has taken a minority
business and served as a portfolio manager on a related stake in direct lender Elm Park Capital.
hedge fund. The arrangement, giving Atalaya 10% ownership of Elm
Gallagher left in September 2018 to focus on Connacht, Park, appears to mark the first time the New York firm has
where he serves as chief investment officer of the Connacht purchased a share of another manager. Atalaya managed
Equity Long/Short Fund. He began trading the vehicle in about $5.5 billion of gross assets at yearend 2019.
February 2020 with $20 million. Elm Park, based in Dallas, has about $600 million under
Gallagher is now looking to raise more money. In con- management. It typically lends to companies valued at less
versations with prospective limited partners, Connacht has than $200 million, a size it characterizes as generally too
pointed not only to strong gains in the flagship fund, but also small to attract adequate attention from banks or larger
to the fact that Gallagher achieved them with an average net funds.
exposure of just 25% to 30%. The firms’ founders have known each other for years,
All the more impressive, the vehicle popped 24.1% in beginning when both worked at HBK Capital in the mid-2000s.
March, a month when the broader market saw steep declines Atalaya head Ivan Zinn hired Elm Park chief Mark Schachter
spawned by the pandemic. The fund also saw gains of 8.5% as a portfolio manager at HBK in 2004. Zinn left in 2006 to
in April, 6% in May and 9.4% in December. The only down form Atalaya, while Schachter remained at HBK, eventually
months came in July, when it lost 8.7%, and August, when it heading its private credit business in North America. He left
was nearly flat. in 2010 to found Elm Park.
Indications are that Gallagher is preparing for an expected “Ivan and Mark have shared investment ideas and referred
rebound in consumer stocks as coronavirus vaccines reach deals to one another as appropriate over many years, and this
wider distribution and as lockdowns ease. That, in Connacht’s formalizes the cross-fertilization of sourcing and expertise,”
view, would trigger a big boost in consumer discretionary Atalaya told investors in an update last week.
spending, which would bode well for the beaten-down stock Under the passive arrangement, Atalaya does not take
prices of casinos, cruise lines, mall operators and movie the- part in Elm Park’s daily operations or administrative deci-
ater owners. sions.
Bank stocks also would rise if consumer spending ramps Atalaya was on the other side of a similar deal in 2017,
up. In addition, the firm expects cyclical healthcare plays to when it sold a minority, non-voting stake to Neuberger Ber-
benefit from a broad re-opening of the economy. man unit Dyal Capital.
Investors who bought into a founders share class pay a Atalaya seeks credit-focused investments in areas it sees
1.25% management fee and 15% of profits. That share class as underserved by traditional lenders or the broader mar-
remains open. Once it closes at an unspecified asset thresh- ket.
old, new limited partners would be subject to a 1.5% man- It manages several drawdown funds focusing on illiquid
agement fee and a 20% charge on profits. investments as well as equipment leasing and some dis-
Connacht also runs the long-only Connacht Small Cap tressed securities, including a flagship opportunities fund.
Core Fund and the long/short Connacht Consumer Fund. In 2019, the firm expanded its mandate, buying contracts
Portfolio managers Scott Kolar and Daniel Zimmerman, both to manage collateralized loan obligations from Tiptree unit
formerly of Goldman, run the small-cap fund. Jason Glass Telos Asset Management, leading to the formation of subsid-
serves as chief investment officer for the consumer-stock iary Atalaya Capital Telos. Last year, Atalaya also increased
vehicle. its investments in commercial real estate. 

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January 20, 2021 4
Hedge Fund
ALERT

October, he raised $3.2 million for an entity called Five Talents

Hedge Fund Team Splits From CPMG Acquisition.
A fast-growing hedge fund that invests in natural-resource CPMG was founded in 1972 by Edward “Rusty” Rose 3d, a
businesses has spun off from longtime alternative-investment former owner of the Texas Rangers professional baseball team.
manager CPMG. He died in 2016. 
Two of CPMG’s three top investment professionals, Ryan
Schedler and Bradley Shisler, left the Dallas firm around year-
end to form Condire Investors, also of Dallas. They had joined
Quantix Tees Up Dual Offerings
CPMG in 2012 and launched a vehicle called Condire Resource Quantix Commodities is lining up additional capital for its
Master Partnership the following year. first hedge fund while also bringing in seed money for a second
That fund, which now has $450 million under management, vehicle.
takes long and short positions in energy, precious-metals and The Greenwich, Conn., firm started trading the first com-
mining companies while employing little leverage. Although it mingled fund under its absolute-return Quantix Commodities
has been closed to new investors since 2018, the fund has more Alpha program on Jan. 1 with $25 million. The vehicle is set to
than doubled its assets since then amid inflows from existing take in $100 million more from two investors by the end of the
limited partners and strong performance. first quarter. The operation also plans to start trading a com-
There’s no word on whether Condire’s management team plans mingled take on its long-only Quantix Inflation Index strategy
to reopen the fund to outside investors. But the new firm main- on Feb. 1 with $13 million from a single investor.
tains a relationship with the fund’s longtime placement agent, Old That would come on top of some $640 million that Quantix
City Investment of New York — a possible indication that Condire already runs.
plans to raise fresh capital for new or existing vehicles. Quantix Commodities Alpha, also known as QCA, had previ-
Condire also runs a small fund called Silver Teal largely on ously been available exclusively in separate-account format. That
behalf of a single client. That vehicle, which had $39 million of component started trading in July 2019 with $50 million of seed
gross assets on Sept. 30, has a narrower investment focus than capital from Finance Michigan affiliate Trowbridge Trading.
Condire Resource Master Partnership. Finance Michigan, which also trades commodities on a pro-
It isn’t clear what prompted Condire’s management team to prietary basis, wrote another sizable check to Quantix last year.
split from CPMG, other than the fund’s rapid growth in recent QCA takes long and short positions in futures on products
years. CPMG runs nearly two dozen private equity and hedge including gold, oil, sugar and grains. In doing so, the market-
funds, which together had some $3.2 billion of gross assets at neutral program often takes the bearish end of soon-to-expire
yearend 2019. Nearly a third of the total was managed in a vehi- contracts while building bullish positions in longer-dated
cle called Yellow Warbler, which like most of the firm’s other ones.
funds is named for a bird. QCA gained 14.1% in 2020 with a Sharpe ratio of 2.2. Appar-
Before joining CPMG, Schedler worked at Trellus Manage- ently attracted by low volatility, one investor opened a $500
ment as an analyst, while Shisler was a principal at private million separate account under the QCA strategy in October.
equity firm Willis Stein & Partners. Condire has a staff of about Quantix Inflation Index, which Quantix refers to as QII, is
seven, including newly hired director of operations Scott Crow- designed to hedge the effects of inflation through bullish com-
ell, who worked at Dallas hedge fund shop Cloverdale Capital modities-futures trades. It reflects a view that demand for such
before it shut down last year. Abby Gallivan oversees investor plays is increasing as central banks worldwide continue to print
relations at Condire. loads of money in response to coronavirus-induced economic
The departures of Schedler and Shisler leave Kent McGaughy weakness.
as CPMG’s sole managing director. Around yearend 2019, the The commingled vehicle’s initial investor, described as a
only other CPMG equity owner, James Traweek, exited his 25% fund-of-funds operator, at first tapped Quantix to develop a
to 50% stake in the firm and left the business. customized commodity index based specifically on inflation
Traweek, who had been with CPMG since 1995, has since risk in its own multi-manager portfolio. But the two sides
started a Dallas firm called Five Talents. In the fourth quarter, wound up striking a deal that allows the client to market the
it was managing some $86 million of Traweek’s family money product to its own investors while giving Quantix the ability to
via a fund he appears to have separately launched in 2017. In shop it to outside limited partners as well.
Quantix was founded in 2018 by chief investment officer
Don Casturo and portfolio managers Daniel Cepeda and Tom
Got a Message for the Hedge Fund Community? Glanfield. Casturo and Cepeda most recently worked in Gold-
man Sachs’ commodities-trading unit, which also was among
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in them and provide services to the alternative-investment Rounding out the investment team is analyst Michael Steele,
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201-234-3999 or khardiman@greenstreetnews.com. of Hutchin Hill Capital, oversees business development and
investor relations. 

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January 20, 2021 5
Hedge Fund
ALERT

DGV Pitches Revenue-Sharing Class Connective Joins 2020’s Big Gainers

Systematic-trading specialist DGV Solutions is winding down Equity investor Connective Capital produced its strongest
one fund while launching another with favorable fee terms for returns ever in 2020.
early investors. The firm’s flagship fund, Connective Capital 1, finished
The Minnetonka, Minn., firm, led by O’Connor & Associ- the year up 33.3%. Its only other vehicle, Connective Capital
ates alumnus Jonathan Havice, is returning capital to limited Enhanced Exposure Strategy, booked a 58.3% gain.
partners in its DGV Multi-Factor Fund after several years of The main fund takes a market-neutral approach, with Con-
lackluster returns. At the same time, it has just started rais- nective Capital Enhanced Exposure using more leverage to
ing capital via a founders share class for DGV Dynamic Fund, maintain a net exposure of up to 50%. Both invest in the shares
which began trading this month. The new vehicle employs a of potentially disruptive businesses in areas including technol-
mix of systematic strategies including equity relative value, ogy, healthcare and energy.
tactical trading, commodity relative value and tail-risk hedges. A good portion of the funds’ profits have come from short
DGV, which had $866 million under management on Jan. 1, positions. Connective is looking at betting against companies
has earmarked $150 million of capacity for the founders class. involved in clean-energy production, businesses with expo-
In exchange for a two-year lockup, investors will pay discounted sures to blockchain technology or bitcoin, and special-purpose
fees equal to 1% of assets and 10% of gains. In addition, the acquisition companies — areas that experienced booms over
manager will share with those limited partners a portion of the the past year.
annual fee revenue it collects. The Palo Alto, Calif., firm also has heightened its marketing
“Investors in the class will receive 15% of the revenues gen- efforts in hopes that last year’s gains will translate to increased
erated by the fund for seven years in exchange for their early interest from investors. Both funds beat the HFRI Fund
support and agreeing to [the] lockup,” Havice wrote in a note Weighted Composite Index’s 2020 return of 11.6%. By compar-
to clients last week. ison, the Nasdaq Composite Index gained 43.6% and the S&P
Each of the strategies employed by DGV Dynamic Fund 500 Total Return Index was up 6.3%.
have been managed for separate-account clients and other The flagship fund, which launched in 2003, was producing
DGV vehicles for a couple of years, Havice noted. an annualized return of 9.2% as of October. Connective Capital
“The Dynamic Fund is a vehicle to bring them all together Enhanced Exposure, which launched in 2007, was running an
in place,” he wrote. “Had the trading results of each of the strat- annualized gain of 10.3%.
egies been aggregated into one vehicle … it would have pro- Connective runs about $58 million overall, split about
duced a 24.5% return in 2020.” evenly between the two funds.
DGV Multi-Factor Fund, which launched in April 2017, had Portfolio manager Rob Romero heads a professional staff of
a short-volatility bias. Not surprisingly, it lost money amid last about a half-dozen. He previously led a firm called Connective
year’s pandemic-induced volatility, dropping 4.2%. Since incep- Capital Ventures that invested in early-stage technology compa-
tion, the fund’s annualized return was minus-0.6% at yearend. nies. In addition, he worked at AOL and Cisco Systems.
“This was disappointing relative to our ex ante expecta- Connective’s staff also includes co-portfolio manager
tions,” Havice wrote. “However, given the fund’s predominant Thomas Hor, who arrived in 2011 from Natura Capital, and
focus was on extracting the volatility risk premium across a senior researcher Tao Long, who came on board in 2012 from
broad range of asset classes and geographies, with a [half] turn Hysta. 
of leverage, it was not a bad result in the face of the volatility
shocks experienced during this time period.”
Proprietary capital that DGV had been managing in the
Critic ... From Page 2
Multi-Factor Fund is now being invested through the Dynamic during the same period.
Fund, the firm told investors. Lack said that if the fund proves successful, he might begin
Havice, who holds the titles of president and chief invest- marketing it in a year, though not as a hedge fund. And he’s
ment officer, founded DGV in 2014. After cutting his teeth at unlikely to impose traditional hedge fund fees, which he has
O’Connor, a derivatives-trading pioneer acquired by UBS in long argued are almost always unjustifiable.
1998, he held senior investment roles at Interlachen Capital and Even so, there’s a touch of irony in Lack’s move. In 2011, he
Jeffrey Slocum & Associates.  authored “The Hedge Fund Mirage,” which makes the case that
managers enrich themselves at the expense of investors.
“If all the money that’s ever been invested in hedge funds
Planning Your Travel Schedule? had been put in Treasury bills instead, the results would have
Check out the most comprehensive listing of upcoming hedge been twice as good,” he wrote.
fund conferences around the world. Go to GreenStreet.com and Lack formed SL Advisors in 2009 following 23 years at J.P.
click on “Events & Conference Calendar” under Insights. Morgan, where he directed more than $1 billion to hedge funds
through two private equity vehicles. 

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January 20, 2021 6
Hedge Fund
ALERT

emphasizing its access to the most talented managers, as well

BlockFi Enters Crypto Trading Biz as its extensive due-diligence process and ability to negoti-
BlockFi, a firm best known for lending against its custom- ate favorable fee terms. Fundana typically pays management
ers’ cryptocurrency holdings, has started a trading desk. fees that are 0.5% to 1%, which are lower than a manager’s
The Jersey City, N.J., operation formally launched the desk standard fee, investors have been told.
this month after a soft opening that saw it carry out trades “I think talking about a consistent research process, lack
totaling $300 million in December. Those exchanges, involv- of team turnover, understanding sectors and the ability and
ing a small number of counterparties, typically totaled $1 hunger for emerging managers to outperform … is what a
million to $10 million apiece. firm like Fundana has been able to do,” a source said.
BlockFi plans to boost its monthly trading volume to $1 The fund-of-funds sector shrank dramatically in the wake
billion before long, funding the activity entirely out of its of the 2008 market crash amid investor complaints about
own inventory. On the other side of the trades would be paying a double layer of fees for lackluster performance.
hedge fund firms, other types of institutions and wealthy Research from Jefferies’ capital-intro unit shows global
individuals. fund-of-funds assets totaled about $650 billion at the start of
BlockFi initially is focusing on trades of bitcoin, ether 2020, down from a peak of nearly $800 billion in 2007.
and litecoin. It also could deal in other assets at the request For fund-of-funds operators to add value, they must dem-
of trading counterparties. The company has access to some onstrate an ability to cut costs for limited partners while also
$6 billion of cryptocurrency holdings via interest-bearing offering flexibility to customize hedge fund portfolios, Jeffer-
accounts it manages for retail investors. ies wrote in a report last year.
The trading desk, which is open on an around-the-clock- Funds of funds “used to primarily serve as an access point
basis, has just a few staffers. The plan is to build a team of 15 for asset owners who had a hard time gaining entry into pop-
to 20 in the U.S. and Asia in the coming months. ular hedge funds,” the report said. But today “they are much
The unit is led by director of institutional services Yev- more customized in providing bespoke solutions to clients.”
geniy Feldman, who joined BlockFi in 2019. He previously Fundana’s Prima Capital Fund typically has positions with
originated and structured loans backed by illiquid assets 20 to 25 managers at a time, with U.S. sector-focused stock-
including hedge fund stakes at Bank of America. pickers accounting for 50% to 60% of its portfolio. The roster
David Olsson fills a sales role as head of institutional dis- includes new and emerging managers as well as fund opera-
tribution. He joined in May from a wealth-management unit tors running up to $2 billion.
at Credit Suisse that caters to ultra-rich individuals. Fundana added new positions with nine managers last
The trading unit’s formation comes amid a rapid expan- year, despite the difficulty of performing due-diligence
sion for BlockFi. Last month, the firm struck a deal to begin reviews because of travel restrictions tied to the pandemic.
lending U.S. dollars secured by bitcoin that institutional The firm typically limits first-time investments to 0.6% to 1%
clients of Fidelity Digital Assets keep in custody with that of the fund’s overall assets — translating to checks of $5 mil-
operation. And in October, it arranged to become a coun- lion to $10 million per manager.
terparty for investors trading bitcoin futures and options via A.W. Jones made just one new investment last year, down
CME Group’s Chicago Mercantile Exchange. from an annual average of two to three. Indications are that
BlockFi launched in 2017 and got its start by writing loans chief investment officer Robert Burch has been largely sat-
to retail holders of digital assets. It now conducts that busi- isfied with the performance of the fund’s current stable of
ness in more than 40 states. managers.
BlockFi is led by founders Zac Prince and Flori Marquez. “The barrier to entry is a high bar right now to find a new
Prince, the firm’s chief executive, counts Katapult and Orchard fund that is better than something [a fund of funds] has
Platform among his former employers. Marquez previously already,” one source said. “That’s a big part of it. Competition
was a portfolio manager at Bond Street and spent time at Oak for capital is significant.”
Hill Advisors.  Another A.W. Jones vehicle focuses exclusively on emerg-
ing long/short equity managers. That strategy gained 26.7%
to 30% in 2020, depending on the share class.
Banner ... From Page 1 Fundana is led by co-founder and chief executive Thomas
an unidentified U.S. wealth manager. Alessie. Co-founder Dariush Aryeh is chief investment officer
The banner year for Fundana and A.W. Jones helps make of Prima Capital Fund.
a fresh case for the value of multi-manager operations with The fund’s strong showing last year follows several years
long experience vetting stock-pickers through multiple mar- of uneven performance, including an 11.8% gain in 2019, a
ket cycles, industry pros said. The volatility triggered by the 5.1% loss in 2018, an 11.3% gain in 2017 and a 1.6% loss in
pandemic is generally believed to have widened the gulf 2016.
between the top- and bottom-performing hedge funds. Fundana’s investors include Swiss pension funds and bank
In its pitch to investors, for example, Fundana has been wealth-management platforms. 

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January 20, 2021 7
Hedge Fund
ALERT

Element Sees Supercharged Recovery Hope ... From Page 1

Global-macro manager Element Capital is predicting an eco- president only under a narrow set of conditions. It also chal-
nomic recovery far more robust than most economists’ fore- lenges the legality of some $300 billion of dividends that the
casts. Treasury collected from Fannie and Freddie following their
Via one of the firm’s periodic research reports, issued in credit-crisis bailouts.
December, Element wrote that a surprising amount of accu- The court heard initial oral arguments on Dec. 9. One pos-
mulated savings at all income levels in the U.S. during 2020 sible outcome: It could decide that the government already
is likely to flood back into the economy in the second quarter has been repaid, restoring the seniority of shareholders while
of 2021 and beyond, “thereby turbocharging what was already allowing retained earnings to accrue to their benefit and allow-
likely to be an explosive recovery.” ing them to participate in a recapitalization that might take
While Element didn’t provide a specific projection of eco- place in 2022. “Now the whole story turns to the ruling of the
nomic growth, the report is significantly more optimistic than Supreme Court, which should be in May or June of this year,”
other recent predictions. Bloomberg in December surveyed 74 one source said.
economists who predicted, on average, that U.S. gross domes- “If the Scotus ruling goes in our favor, it will require the con-
tic product would expand by 4% in 2021 and by 3.1% in 2022. servator to be a conservator. That is, no more raiding on the
That same month, the governors and presidents of the Federal GSE,” another source said, referring to government-sponsored
Reserve Board projected growth of 3.7% to 5% in 2021 and 3% enterprises. But, he added, a decision in the government’s favor
to 3.5% in 2022. could result in a messy situation in which nobody would take
Element’s forecast is heavily dependent on its analysis of the any money out of Fannie or Freddie for 10 years but related
“enormous amount of pent-up savings” in consumers’ bank warrants would expire in 2027. The agencies’ preferred-stock
accounts. Those savings in part reflect government stimulus agreements also would require restructuring.
programs put in place in response to the coronavirus pan- While Treasury Secretary Steven Mnuchin and FHFA head
demic. The firm said stimulus payments “sent personal income Mark Calabria had vowed to move Fannie and Freddie into pri-
skyrocketing” even as global business activity slowed and as vate hands, Biden has long been viewed as supporting contin-
consumption in certain sectors collapsed. The report also cited ued government control.
the increasing availability of coronavirus vaccines. In over-the-counter trading, the common shares of Fan-
While savings increases in the U.S. were skewed toward nie and Freddie have fully given back gains that followed the
wealthier consumers, Element wrote that account balances also November election, when it seemed the Trump Administration
bumped up among the bottom 50% of American earners in the plan might have more momentum toward its goal. Meanwhile,
first half of 2020. Element attributed some of its findings to hedge funds including Mountaineer Partners’ Mountaineer
research by New York data and analytics company Exante Data. Partners GSE Opportunity Fund and Muirfield Capital’s Muir-
“It’s surprising to see those at the lower end of the spec- field GSE Fund have been betting on the agencies’ junior pre-
trum accumulating any additional checking balances,” the firm ferred shares.
wrote. “Instead, while the absolute amount is small, even these In marketing its fund early last year, Mountaineer was pro-
lower decile consumers are accumulating additional balances, jecting a return of 50% to 100% over a year to a year-and-a-
not shedding them. In a more benign 2021 economic environ- half. Acknowledging the potentially volatile nature of the play,
ment, these consumers will also be much better positioned” to the New York operation presented investors at the time with
spend. a “bear case” return of minus-50% and a best-case return of
Element calculated that the total value of “excess savings” 200%.
in the U.S. stood at $1.4 trillion, or 6.2% of U.S. gross domestic It was hoping to raise $100 million, up from $25 million last
product. The firm said that figure was unusually high in 2020 April.
because the pandemic dramatically altered consumer behav- The Muirfield fund launched in December 2017. After a flat
ior, slowing air travel, knee-capping cruise lines and reducing first month, it lost 17% in 2018 and gained 67.3% in 2019. In
spending in other sectors. marketing the vehicle last year, Muirfield pegged the junior
As the U.S. and the world approach herd immunity from the preferred shares of Fannie and Freddie as trading at 30% of
coronavirus, those industries will rebound, the firm predicted, their par values while predicting that they would gain value
and the need for precautionary consumer savings will dimin- rapidly once the agencies exit conservatorship.
ish. Marketing firm Protocol Capital still was shopping the
Element is led by Jeffrey Talpins. The firm told investors vehicle to potential limited partners as of Dec. 8. Marketing
early this month it would return $2 billion of its client assets materials at the time expressed confidence in the privatization
in an effort to focus on profits, the Financial Times reported. process, referring to “a good prospect that Calabria will end the
Element was managing $18 billion roughly a year ago, when it conservatorships before Biden takes office on Jan. 20th.”
returned $3.6 billion to investors. Its hedge fund was up 18.8% The fund had $160 million under management at the begin-
in 2020.  ning of this year. 

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January 20, 2021 8
Hedge Fund
ALERT

new vehicle could be part of that effort.

Risk-Transfer Bets Aid 400 Capital Spotts declined to comment on his plans.
A mix of opportunistic investments helped hedge fund It’s unclear what legal actions Prophecy faces from lim-
manager 400 Capital eke out a gain in 2020. ited partners over its investment with Broad Reach. What’s
The New York firm’s flagship 400 Capital Credit Opportuni- known is that a fund-of-funds operator, LyonRoss Capital,
ties Fund finished the year up 1.75%, propelled by a 2.75% rise has filed a lawsuit against Prophecy in U.S. District Court in
in December, according to sister publication Asset-Backed Alert. New York. The suit alleges a securities violation, though the
While some securitization-focused fund operators were text of the complaint is under seal.
able to log bigger gains in 2020, 400 Capital’s showing beat the LyonRoss, a New York firm led by Piers Playfair, had
market as a whole. The HFRI RV: Fixed Income-Asset Backed $186.5 million under management at yearend 2019 and was
Index, for example, has had a 12-month decline of 1.3%. advising on another $382.8 million. Other plaintiffs in the
The exact source of last month’s gain isn’t clear, but the firm lawsuit against Prophecy include the Piers Playfair Retire-
particularly had been making money on risk-transfer securi- ment Plan & Trust, Sussex Directories Seze, Timberdale Ltd.
ties in the preceding months, chipping away at losses it was and Vladimir Kuznetsov.
running earlier last year. In that area, the firm focused on the Before founding LyonRoss in 2007, Playfair spent about
Class-B and Class-M pieces of deals issued under Fannie Mae’s 12 years as a partner at alternative-investment firm Bassini
Connecticut Avenue Series label and Freddie Mac’s Structured Playfair Wright. He earlier worked at BEA Associates and
Agency Credit Risk brand. Salomon Brothers.
At the height of the market’s coronavirus-induced disrup- Spotts, a former Merrill Lynch equity researcher, founded
tions, when 400 Capital moved in, those securities were trad- Prophecy in 2001. The firm hasn’t updated its SEC Form
ing at spreads as wide as 1,100 bp over Libor. They since have ADV since December 2019, when it reported gross assets of
returned to pre-virus levels around 275 bp. about $561 million as of Dec. 31, 2018.
The fund hadn’t invested in risk-transfer bonds since 2017, A source said Prophecy Trading Advisors had $10 mil-
deeming the potential returns too small. It also made money lion invested with Broad Reach, a Conshohocken, Pa., hedge
last year on new subprime auto-loan bonds from issuers fund operator founded by Brenda Smith. Federal prosecu-
including CarMax and Santander Consumer USA. Triple-B-rated tors arrested Smith in August 2019 and charged her with
notes from those deals are trading around 130 bp over swaps six counts of wire fraud and one count of securities fraud in
today, in from 800 bp in April. connection with the alleged Ponzi scheme. She is accused of
The 400 fund has $1.9 billion under management. It invests stealing at least $68 million by diverting capital that should
in a mix of asset-backed securities, residential and commercial have been used for investments to pay other limited part-
mortgage bonds, collateralized loan obligations and high-yield ners, finance other businesses and cover personal expenses.
corporate debt in the U.S. and Europe. Her case is pending trial.
All told, 400 Capital has $4.6 billion under management. Prophecy has said it didn’t lose any money on its invest-
Former Bank of America structured-product head Chris Hente- ment with Broad Reach. But last March, the firm informed
mann started the flagship fund in February 2009, taking advan- investors that its auditor, Deloitte, had resigned and with-
tage of opportunities stemming from the market crash to book drew its 2018 opinion. Prophecy said it had no knowledge of
a 20%-plus gain that year and in 2010. The vehicle was up 7% Broad Reach’s alleged fraud.
in 2018 and 8.1% in 2019.  Prophecy reported that its flagship vehicle, Prophecy
Trading Advisors, was up 1.2% year-to-date through March
6, 2020, following gains of 7% in 2019, 7.9% in 2018 and
Offering ... From Page 1 7.6% in 2017. The same performance report showed that the
talk that the firm is shutting down, but others have said fund hadn’t had a single down month since its inception in
founder Jeffrey Spotts plans to relaunch the business. The October 2011. 

LATEST LAUNCHES
LATEST LAUNCHES

Equity at
Portfolio managers, Launch
Fund Management company Strategy Service providers Launch (Mil.)
DGV Dynamic Fund Jonathan Havice Equity: systematic, Jan. 1
Domicile: U.S. DGV Solutions, relative value and
 See Page 5 Minnetonka, Minn. tactical trading

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January 20, 2021 9
Hedge Fund
ALERT

THE GRAPEVINE did even better. The firm’s assets have Kamensky tried to suppress bidding on
rebounded to about $12 billion, up shares of bankrupt retailer Neiman Mar-
... From Page 1 from $6.4 billion in early 2019. cus so he could buy them himself. Before
joining Marble Ridge in 2016, Casey
initially focused on the systematic Moore Capital spinoff Mane Global has filled investor-relations or sales posts at
trading of futures and exchange-traded hired an analyst as it continues to build King Street Capital, J.P. Morgan, Bank
funds from 2012 to 2016. In between, he staff ahead of a planned $1 billion of America and Morgan Stanley. New
was head of systematic macro trading launch. Raymond Li joined the New York-based Governors Lane, led by Isaac
at Marshall Wace from 2017 until this York firm this month from the National Corre, managed $1.8 billion of gross
month and head of research at Florin Basketball Association, where he had assets at yearend 2019. Its Governors
Court Capital from 2016 to 2017. Prior to worked in a global strategy role since Lane Master Fund gained 15% in 2020.
his first stint at Millennium, Fischhoff 2017. Li previously was an investment-
spent time at Vienna-based FTC Capital banking analyst at Evercore. Mane, led DGV Solutions hired an investment
and at Geneva-based Pictet. Millennium, by former Moore Capital portfolio man- professional and expects to announce
headquartered in New York, has $46.7 ager Rami Abdel-Misih, plans to launch a new head of investor relations next
billion under management. this year with backing from Moore month after parting ways with two
founder Louis Bacon. It will employ a employees. Simon Liedtke was brought
Brevan Howard Asset Management has low-net strategy to invest in the stocks on as a trading analyst after recently
hired a former ExodusPoint Capital of consumer and technology companies completing graduate school, the Min-
staffer as a trading operations manager worldwide. netonka, Minn., operation wrote in an
in New York. Seth Cohen started last investor update last week. Co-head of
month. He was a business manager Event-driven manager Governors Lane trading Tom Madden and managing
in ExodusPoint’s global fixed-income has installed Bill Casey as head of director Michael Warsh are no longer
division from 2018 until September. investor relations. Casey, who started with the firm. Their plans are unknown.
Cohen’s previous employers include this month, previously served as chief Co-head of trading Joseph Richardson
HedgeServ and Morgan Stanley. Bloom- operating officer at Marble Ridge Capital, takes over as sole head of trading. Mad-
berg reported this month that Brevan which shut down late last year following den arrived in 2014 from Walleye Capi-
Howard’s main fund gained 27.4% last the arrest of founder Dan Kamensky on tal, while Warsh joined in 2016 after
year, its best showing since 2003, and charges of fraud, bribery, extortion and working in a business-development role
that other funds run by the manager obstruction of justice. Prosecutors allege at the Chicago Board Options Exchange.

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