Deutsche alumnus launches billion-dollar hedge fund
An alumnus from Deutsche Bank has raised the first billion dollar hedge fund this year, although financiers of start-ups have cautioned against exuberance, saying it could be the only firm "in the foreseeable future" to do so.
Arvind Raghunathan, former head the global arbitrage business at Deutsche Bank, has raised about $1.2bn (€720m) for his newly-launched Roc Capital Management in New York, according to Bloomberg. This includes $500m from his former employee.
Roc Capital is the biggest launch for several months, investors said, and it showed glimmers of renewed confidence in an industry that was battered by record numbers of fund liquidations last year, and an eight-year low in the number of new funds launched.
One London investor in hedge funds said: "This is a huge amount to get going with these days. It helps to have past employers with deep pockets. There has been some renewed interest in seeding hedge funds recently, but not that I have seen to this extent, and not that I'd expect to see again in the foreseeable future."
One fund of funds manager added: "The average launch this year is somewhere between $15m or $20m, and $75m, nowhere near $1bn."
Other very large fund launches recently have not come from bank employees, but from hedge funds. Plural Investments, a spinoff from SAC Capital Advisors founded by SAC alumnus Matt Grossman, began with about $900m early last year.
But Deutsche Bank has seen another of its former traders leave to establish hedge funds recently. Former bond trader Boaz Weinstein is scheduled to launch Saba Capital Management in summer.
The number of hedge fund start-ups have started to pick up as the market has improved. Seeders, which finance new hedge funds, are showing renewed interest in backing start-ups after funds made 9.8% by the end of May, said data providers Hedge Fund Research.
Last year funds lost a record 19%, HFR said. Partly as a result, capital to support new products fell by 70% in the second half, said financial intermediaries Acceleration Capital.
However, about 150 funds started up in the first quarter of this year, said HFR, the highest number of openings since the second quarter of last year. This 376 hedge funds that liquidated in the first quarter was less than half the 778 of the fourth quarter of last year.
Since the middle of last year the industry has lost 1200 funds and almost 200 funds of funds, HFR said.
Deutsche Bank declined to comment. Roc Capital Management could not be reached.
-- Write to David Walker at dwalker@efinancialnews.com
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