Steve Cohen Backs Macro Fund of Ex-Brevan Partner MelkmanBy
Startup will have more than $400 million under management
Billionaire is providing an anchor investment for Light Sky
Ben Melkman, a former partner at Brevan Howard Asset Management, is receiving capital from billionaire Steven A. Cohen for the hedge fund he plans to start next month with more than $400 million under management, according to people with knowledge of the matter.
Cohen, whose former hedge fund SAC Capital Advisors racked up annual returns averaging 30 percent before before the firm pleaded guilty to securities fraud in 2013, is providing an anchor investment to Light Sky Macro, said the people, who asked not to be identified because the matter is private. The fund will begin trading March 1, the people said. Representatives for Cohen and Melkman’s New York-based fund declined to comment.
Melkman, 37, who left Brevan Howard in May, is jumping back into the hedge fund industry at a time when new managers are struggling to attract capital and the number of startups is at its lowest since 2000, according to Hedge Fund Research Inc. For each of the last two years, more funds have shuttered than started, HFR data show.
While macro funds have struggled to perform in an environment of soaring stock valuations and ultra-low interest rates, managers including Louis Bacon have said the outlook for the strategy, which focuses on macroeconomic trends, will improve under Donald Trump’s presidency as a result of higher interest rates, a stronger dollar, a booming corporate sector and improving market liquidity.
Light Sky Macro will take concentrated, long-term positions. It plans to cap assets at $1 billion during the first year, Bloomberg reported in June. Cohen, known as a fiercely competitive trader who makes big bets on relatively short-term positions, said at a conference in May that he was “blown away by the lack of talent” in the industry, and in recent years he’s rarely backed outside investors.
Recently, he’s committed $250 million to the crowd-sourced Quantopian Inc., an online platform where coders build and run computerized trading programs, as well as an investment from the venture-capital arm of his family office Point72 Asset Management. He’s also backed Gabriel Plotkin, one of the top money managers at his former hedge fund, who started Melvin Capital with cash from Cohen in 2014.
Melkman helped oversee assets in Brevan Howard’s main fund and was the senior trader for the company’s dedicated Argentina fund, which had more than $500 million under management before liquidating last year after Argentina’s creditor dispute was resolved. It produced net returns of 18 percent since opening to outside investors in January 2015.
In November, Melkman said that a top trade idea was a so-called steepener in the Gilt market, a bet that accelerating inflation coupled with an increase in U.K. government spending would drive up yields on long-dated bonds, he told Bloomberg Television. He said he expected a similar steepening across U.S. Treasury yields and said Japanese equities would outperform European stocks. So far, those bets have all panned out.
Melkman hired Alberto Ades, the former co-head of global economics for Bank of America Corp., as chief economist for the fund, Bloomberg reported in September. He also tapped Goldman Sachs Group Inc.’s Joseph Mauro, who led the bank’s fixed income, currencies and commodities sales out of London for European hedge funds, to head up markets. Barry Schachter, a former chief risk officer at SAC, was hired for that same role, and Douglas Spiegel of Realm Partners was appointed chief financial officer.
Melkman joined Brevan Howard in 2009 and was based in Geneva, after several years at Morgan Stanley. He left Alan Howard’s hedge fund firm during a year in which the company suffered $7 billion in outflows.