Brookfield expands hedge fund business into Europe

Brookfield Asset Management is expanding its hedge fund business into Europe, as the Canadian investment group bets on a trading strategy that has delivered stellar returns for some of the industry’s biggest names during the pandemic.

The Toronto-based firm’s Brookfield Hedge Fund Solutions Advisors is a multi-strategy unit trading areas such as equity market neutral and event-driven, a profitable corner of the industry dominated by the likes of Citadel and Millennium Management.

Until now, the low-profile business, which runs around US$1 billion in assets, has based all its trading teams in New York. But it is now opening an office in London for its hedge fund business and has begun hiring, according to people familiar with the matter.

It has recruited William Rushmer, previously a partner at Mayfair-based investment firm CZ Capital, to run a long-short strategy in U.K. stocks in London, and plans to expand the business further, one of the people said.

The move by Brookfield, which manages around US$650 billion in assets globally and is best known for its real estate, infrastructure and private equity investments, will increasingly pit it against some of the biggest, most established names in the multi-manager hedge fund sector.

Such funds, which employ tens or even hundreds of small teams of traders, have enjoyed a strong period of performance and attracted billions of dollars from investors.

Ken Griffin’s Citadel, which manages US$43 billion, gained 26.3 per cent last year, and made money across credit, commodities, equities, fixed income and macro, and quantitative strategies. In 2020, it made 24.5 per cent.

Izzy Englander’s Millennium Management, which has US$52 billion in assets, gained around 13 per cent last year, having made 25.6 per cent in 2020, its best performance in two decades, while Steve Cohen’s Point72 and Balyasny also made gains last year.

Funds have been helped by their diversification across assets, an ability to cut risk quickly if conditions sour or to fire underperforming managers, and sharp price moves in areas such as commodities.

Data group eVestment noted that “2021 will go down as a year dominated by multi-strategy hedge funds”, noting that the bulk of the hedge fund industry’s inflows last year went into this sector.

Such funds, which often give autonomy to trading teams within strict risk limits, gained 10.5 per cent on average last year, according to eVestment, just ahead of the overall industry’s average gain. Many investors favour these funds because of the low volatility of their returns and their ability to make money even when managing a large base of assets.

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The success of such funds during the pandemic has led to a fierce battle for talent, which has pushed payouts for top traders sky-high. Payments just to compensate top traders when they leave a rival, for instance, can now reach US$10 million and occasionally as much as US$20 million.

Brookfield’s hedge funds business, which is led by New York-based Jason Siegel, began running money in 2019.

The Canadian group as a whole has been investing in Europe for close to 20 years. Its assets in the region, which include real estate, infrastructure and renewable power, have ballooned from US$6 billion in 2013 to around US$110 billion.

Brookfield declined to comment.

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