Goldman Sachs Said to Swap Fees for Stake in Cantab Hedge FundJesse Westbrook
Goldman Sachs Group Inc. has taken a stake in Cantab Capital Partners LLP after the two firms revised the terms of a licensing agreement the hedge fund had used to pay the New York-based bank for using its technology.
Cantab paid Goldman Sachs fees as part of a deal when the firm started in 2006, according to two people with knowledge of the matter who declined to be identified because Cantab is private. They restructured it last year, with Goldman Sachs giving up the fees in exchange for a minority ownership stake in Cantab, they said. Cantab, based in Cambridge, England, told its investors of the change in a letter earlier this month.
“As you are aware, we have been spending 2012 building our own” information-technology system, Cantab Chief Investment Officer Ewan Kirk said in the letter, which was obtained by Bloomberg News. “As part of this, the existing profit-share arrangement with Goldman Sachs has been amended and as from December 31, Goldman Sachs will become a partner.”
Kirk, who has a doctorate in mathematics from England’s University of Southampton, led a team of 120 employees at Goldman Sachs focused on quantitative investing before he founded Cantab with $60 million. The hedge fund, which relies on computers and mathematical algorithms to spot trades, has grown to manage $4.7 billion, according to the letter.
Officials at Cantab and Goldman Sachs declined to comment on the size of the bank’s stake in the hedge fund.
Goldman Sachs hasn’t invested in Cantab or paid any money for the stake as part of the restricting of the licensing deal, one of the people said. The Cantab position isn’t held by Goldman Sachs’ Petershill unit, which uses client money to buy stakes in hedge funds, the person added.
Cantab, which has stopped accepting money from new investors, gained 15 percent last year and 13 percent in 2011, according to the client letter. Others have lost money as political announcements whipsawed markets and broke up the trends in asset prices that quant funds try to follow.
The Newedge CTA Trend Sub-Index, which tracks the performance of the largest computer-driven hedge funds, fell 3.4 percent in 2012 and 7.9 percent in 2011.