By Liz Moyer
Henry Swieca is preparing to return to the hedge fund world as a startup investor in a new fund managed by one of his proteges at Talpion Fund Management LP.
Clearline Capital LLC, managed by Marc Majzner, was formed in January 2012 with $50 million of Talpion's money and another $20 million from Mr. Swieca and his family. The "catalyst value" fund, which invests in cheap stocks of companies that are undergoing some kind of change or event, is set to open to outside investors on March 1.
Mr. Swieca is perhaps best known for co-founding Highbridge Capital Management LLC. J.P. Morgan Chase & Co. (JPM) bought a majority stake in $29 billion-asset Highbridge in 2004 and the remainder in 2009, and Mr. Swieca went on to open Talpion.
Regulatory changes in the industry convinced Mr. Swieca to close Talpion to outside investors in late 2011 and return investor money to focus on managing his own money. Clearline would be Mr. Swieca's first try at providing start up capital to a new outside fund.
Mr. Majzner, 34 years old, has managed money for Mr. Swieca for two years. They both declined to comment on the performance of the Clearline portfolio.
Clearline and its seven-person staff will continue to be based in Talpion's offices on the 34th floor of a high rise in Midtown Manhattan, walled-off from the main trading floor. Talpion provides the infrastructure and support as part of a shared-services agreement with Clearline and also shares in the profits.
In a recent interview, Mr. Swieca said the arrangement will ease the burden of raising outside capital for Mr. Majzner in a difficult environment.
Last year, investors sank $34 billion into hedge funds, but that is the lowest level of annual inflows since 2000, according to data from Hedge Fund Research Inc. in Chicago. Inflows were half that of 2011 and less than the $55 billion investors put into hedge funds in 2010. There were outflows of money from funds in 2008 and 2009.
Smaller hedge funds typical of the size of a startup had $1.8 billion of investor inflows last year, HFR says, but that is dwarfed by the $56 billion raised by funds with $5 billion or more of assets. Other categories in the middle of those two extremes saw investor outflows last year.
"It's been a challenging environment for small- to midsize funds, and that's a function of the investor risk aversion that has been so pronounced over the last two years," said Kenneth Heinz, president of HFR.
Clearline's potential clients include those investors who got their money handed back to them by Mr. Swieca in late 2011.
"With seed capital and infrastructure he was able to solve many of the issues emerging managers face in a difficult fundraising environment," Mr. Swieca said of Mr. Majzner.
Mr. Swieca and Highbridge co-founder Glenn Dubin worked with several star managers at Highbridge, including Bart Baum and Dan Stone, who left and founded $2 billion Ionic Capital Management in 2006. Carl Huttenlocher, Highbridge's former head of Asia, founded Myriad Asset Management. Marc Vanacore succeded Mr. Swieca as chief investment officer of Highbridge.
Mr. Majzner was an investment analyst at North Run Capital, a Boston-based hedge fund, before joining Talpion. Before that he worked at private equity firm Spectrum Equity Investors after starting his career as an analyst at Credit Suisse.
Regulatory changes and the financial crisis put a damper on hedge fund startups in recent years. In 2009, the same year Mr. Swieca left Highbridge, 1,023 funds closed and 784 launched, according to HFR. Through September last year, 635 had closed and 824 had opened.
New financial regulations requiring funds to register with the Securities and Exchange Commmission if they want to manage outside money, plus the difficulty in matching returns from prior years, prompted departures from the industry by several well-known managers, including George Soros and Stanley Druckenmiller.
Mr. Swieca said in the interview that he decided to do the same in 2011 after talking about it over a sushi lunch with Mr. Druckenmiller.
Write to Liz Moyer at [email protected]
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