Stan Druckenmiller’s former colleagues at Duquesne Capital Management LLC are opening a new firm with $5 billion in assets, said four people briefed on the plans, the second-largest hedge-fund startup ever.
Druckenmiller, 57, said in August that he was closing his 30-year-old hedge-fund firm and returning client capital. He will invest about $1 billion in the new fund, Point State Capital, according to the people. He will have no ownership stake in the firm, they said.
The remaining $4 billion will come entirely from former Duquesne investors, said the people, who asked not to be named because the fund is private. Jack Meyer, the former head of Harvard University’s endowment, holds the record for the largest hedge-fund startup, when he opened Convexity Capital Management LP with $6 billion in 2006. This year, the biggest new funds have opened with less than $1 billion.
“Five billion dollars is a big number, but it’s logical given this isn’t a pure startup,” said Brad Balter, head of Boston-based Balter Capital Management LLC, which farms out money to hedge funds.
Shawn Pattison, a spokesman for Point State, declined to comment, citing securities law.
Point State, which is closed to new clients, will begin trading next year and be based in New York, the people said. Sean Cullinan, who was vice chairman of Duquesne, will serve as CEO of Point State. Six former Duquesne portfolio managers will be joining the firm, which is named for a park in Pittsburgh where Fort Duquesne once stood.
As of the beginning of November, Druckenmiller had returned about 98 percent of the $12 billion in investor capital he managed. He will open a family office in which he’ll oversee about $3 billion, said two people familiar with his plans.
In August, when he announced his retirement, his funds were down about 5 percent. He’s closing the funds with a small gain for this year, according to investors, having rightly predicted that markets would rally, buoyed by the expectation of a strong Republican showing in U.S. elections and anticipation that the Federal Reserve would announce the purchase of hundreds of billions of dollars in Treasuries to help reduce unemployment and avert deflation.
Duquesne, which has never had a money-losing year, posted an average annual return of 30 percent. A $1,000 invested in 1986 would be worth $500,000 today.