April 11, 2018 / 2:20 PM / 11 days ago

Hedge fund Folger Hill to merge with Schonfeld

BOSTON (Reuters) - Folger Hill Asset Management, a hedge fund run by former SAC Capital Advisors LP executive Sol Kumin, will merge with Schonfeld Strategic Advisors after a period of sluggish returns.

“It became clear that the best path forward for the Folger Hill team was to combine forces,” Kumin wrote in a letter to investors dated April 10 and seen by Reuters on Wednesday.

Schonfeld has been a key investor in Folger Hill’s Asia fund, and the move will let “the majority of our staff and investment teams prosper,” Kumin wrote.

Kumin said he will become chief strategic officer at Leucadia Asset Management, which backed Folger Hill. Leucadia will also make an investment in Schonfeld’s fundamental equities fund. Schonfeld has been managing money since 1988 and invests roughly $20 billion.

Kumin’s decision to merge his fund into Schonfeld illustrates the pressure on managers as equity markets have boomed for years and investors’ patience with high costs and middling returns has worn thin.

“If you charge a lot of fees and promise alpha, you’d better deliver because investors won’t give you a lot of time,” said Greg Dowling, chief investment officer and head of research at Fund Evaluation Group.

Hedge Fund Research data show that more funds closed their doors than opened in 2017.

Folger Hill was started in 2014 after Kumin left billionaire investor Steven A. Cohen’s SAC, where he had been chief operating officer. He quickly raised more than $1 billion in assets for the firm, which sought to mimic SAC, where teams of stock pickers vied for a central pool of money to invest and the firm delivered average annual returns of 30 percent.

Performance at Folger Hill, however, never mirrored SAC’s legendary returns. While it picked up in 2017 with gains of roughly 2.7 percent in the U.S. and Asia funds, a 17.5 percent loss in 2016 in the U.S. fund still weighed heavily.

By late 2017, Kumin had reunited with Angus Wai, who had run Asia Pacific for SAC, and the budding business in Asia had helped offset some stumbles in the U.S.-focused business where redemptions followed on the heels of the losses.

The Asia fund will continue to operate and all 45 employees will transition to Schonfeld.

The U.S. fund is being liquidated, the letter said, but many U.S.-based employees, who work in offices in Boston and New York, are expected to move to Schonfeld.

Reporting by Svea Herbst-Bayliss; editing by Jonathan Oatis

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