• Mike Butler, the head of human resources at Steve Cohen's hedge fund, Point72, is leaving.
• His departure comes in the wake of a staffer's lawsuit alleging widespread gender discrimination, including stark wage disparities.
• Butler's exit follows that of Doug Haynes, who left as Point72's president earlier this year.

The head of human resources at the billionaire Steve Cohen's hedge fund is leaving four years after he was brought in to help repair the firm's culture in the wake of an insider-trading scandal.

Mike Butler, who has been the $12 billion fund's head of human capital since 2014, is retiring from Point72, a spokesman confirmed. His departure follows that of Doug Haynes, who left as the firm's president earlier this year.

In a statement, Point72 said: "Mike led the modernization of the Human Capital team at Point72. He has been a person of high integrity who has been passionate about improving the firm. We thank him for his service."

Reached by phone on Tuesday, Butler declined to comment. He said in an emailed a statement on Wednesday:

"After 30 years as an HR professional, including nearly four years as Head of Human Capital at Point72, I have decided to retire. I am extremely proud of the transformational work we did with our Human Capital team during my tenure, finding new ways to source, select, develop and retain our employees. We delivered on our mission to create the greatest opportunities to the industry's brightest talent. I will continue to serve as a consultant to the firm through the autumn and I am leaving the Point72 Human Capital function in very capable hands."

In February, a female employee filed a lawsuit alleging widespread gender discrimination at the hedge fund, including stark wage disparities between men and women who did the same work.

Cohen's previous firm, SAC Capital, pleaded guilty to insider trading in 2014 and paid a record $1.2 billion fine. He founded Point72 shortly afterward.

In 2016, Butler and Haynes, a McKinsey veteran, joined forces with an external consulting firm to identify the essential skills required for individual roles, build an inventory of those skills across every position in the firm, and map it all out, Business Insider reported at the time. It was part of an effort to revamp the company's culture and prepare it to accept client money again.

SEE ALSO: Och-Ziff's co-CIO Jimmy Levin has been selling a bunch of his stock in the hedge fund — and Wall Street investors are wondering why

DON'T MISS: New lawsuit casts doubt on what Point72's deputies have been saying for years

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NOW WATCH: The legendary economist who predicted the housing crisis says the US will win the trade war

• FT: Steve Cohen's hedge fund Point72 has been blocked by the UK regulator from taking British money.
• Cohen was banned from managing money for two years after his former hedge fund, SAC Capital, pleaded guilty to insider trading charges in the US.

LONDON — Hedge fund billionaire Steve Cohen has reportedly hit a roadblock in the UK.

The Financial Times reported on Friday that Cohen has been blocked by the UK regulator from accepting outside investor money in Britain for his new hedge fund Point72. The FT said that one source claimed Cohen was deemed not to pass the "fit and proper" test by the UK's Financial Conduct Authority (FCA).

A spokesperson for Point72 wasn't immediately available to comment.

Cohen's famed former hedge fund SAC Capital pleaded guilty to insider trading in the US in 2013 and paid a $1.3 billion fine. Cohen never admitted personal blame but was banned from supervising funds for two years. That ban expired earlier this year.

Cohen set up Point72 to manage his personal fortune, estimated at over $11 billion by Forbes, and has started to accept outside money in the US since his ban expired. Documents seen by Business Insider earlier this year show Point72 was up 3.3% after fees in March of this year.

Point72 has had a London office since 2016 and had hoped to raise capital in Britain, which was why it applied to the FCA for permission.

SEE ALSO: We've seen the numbers for Steve Cohen's big hedge fund comeback, and they're solid but not spectacular

DON'T MISS: We talked to Steve Cohen's right-hand man about Point72 Ventures' latest investment, tech on Wall Street, and cryptocurrency

NEXT UP: The president of Steve Cohen's hedge fund has resigned after a female employee accused him of gender discrimination

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NOW WATCH: The legendary economist who predicted the housing crisis says the US will win the trade war

• Michael Graves, a portfolio manager for Steve Cohen's quant arm, will start his own fund — the third launch of his career.
• Graves was one of the top portfolio managers for Cubist, Point72's quant arm, and at least four members of his former team will join him at his new fund. 
• Quant funds struggled last year, losing more money than the rest of the hedge fund industry on average, according to data from Hedge Fund Research. 

A former top quant manager at Steve Cohen's firm is launching his own fund.

Michael Graves, who was a portfolio manger at Point72 Asset Management's Cubist unit for nearly a decade, resigned from the firm in 2018. Now, he's starting his own quant-focused hedge fund and asset management firm, a source familiar with the new venture told Business Insider. At least four analysts and developers from Graves' team will join him, a source said. 

The quant-focused fund will launch in the middle of the summer with a fundraising target between $600 million and $750 million. Paloma Partners, which helped launch quant giant D.E. Shaw in the 80s, is one of Graves' investors. 

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The potential launch comes at a rough time for hedge funds. The average fund lost more than 4% in 2018. Quant funds performed even worse, declining more than 5% for the year, according to data from Hedge Fund Research.

The number of hedge fund launches also slowed in 2018, though big names like former Millennium star trader Michael Gelband were still able to raise money. According to Hedge Fund Research, last year ended with four fewer hedge funds that it began with in January, falling from 8,335 to 8,331.

Graves' new hedge fund, which doesn't have a name yet, will be able to use the track record that he and his team developed at Cubist.

Graves joined Point72 in 2010 after working as a quant for years at firms including the former- Credit Suisse First Boston and BNP quant subsidiary Cooper Neff. Fortress Investment Group bought the first two hedge funds he founded, FountainHead Capital and Area51, and made Graves a managing director in 2006, where he worked until he left to found Tesseract Capital. He left Tesseract in 2010 to join Cubist.

“We appreciate Michael’s contributions to the firm over the past nine years and wish him the best in his new endeavor," a statement from Point72 stated. 

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• Hedge funds have always been able to recruit analysts and traditional stock-picking portfolio managers from investment banks but have run into trouble persuading coders and data scientists to choose Wall Street over Silicon Valley, industry observers say.
• Just "throwing money" at top graduates from Ph.D. programs has not worked because, industry sources say, hedge funds are being outbid for this type of talent.
• Funds are now getting creative with the ways they recruit this type of talent, with Silicon Valley-like hack-a-thons or guarantees to work on a new internal product that's more startup-like.

On one side, there are billions of dollars from the world's biggest investors ready to be run by your algorithm. On the other, there's a chance to work at the most talked-about companies on the planet — right as they promise to turn their employees into millionaires overnight.

The battle for top tech talent between Wall Street and Silicon Valley is nothing new, but it's reaching a fever pitch in the hedge fund industry, industry participants and consultants said, as both sides eye billions of dollars up for grabs thanks to a host of buzzy tech unicorns expected to go public, like Uber, Slack, and Pinterest.

This Silicon Valley gold rush has forced hedge funds to grapple with a problem they hardly ever run into: The industry is being outbid for the top talent.

See more:The explosive growth of quant investing is paving the way for 'super managers' in the hedge-fund industry

"The only way hedge funds have been able to get [top tech talent] is by throwing money at them, and that's not really working in the same way it used to," said Vickram Tandon, an industry headhunter.

If you have a Ph.D. and a machine-learning background, the "demand from Silicon Valley is unquenchable right now," said Ross Garon, the head of Point72's Cubist unit.

"Absolutely we recruit those candidates and want more," Garon said. But the offers from Silicon Valley are more than the finance world is willing to pay, several industry sources said.

An explosion of alternative-data sources pouring into hedge funds has increased the demand for data scientists and others who can build specific infrastructure to actually put the millions of dollars of data to work effectively, for example.

But funds rarely have the in-house personnel to build out this infrastructure, said Erkin Adylov, CEO of Behavox, a data-analytics company that helps funds with compliance, "because that type of talent is typically taken out by someone like Netflix or Google or Amazon."

A Wall Street Oasis survey at the end of last year found that quants at Citadel, Two Sigma, Man Group, D.E. Shaw, and Millennium made an average base salary of $163,000 with an average bonus of $100,000.

Project-lead positions at top Silicon Valley firms that many top machine-learning specialists would be qualified for command salaries in the millions, according to quant recruiters. And their compensation package usually includes either stock options or an ownership stake in a still-private company.

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Not hiring right out of undergrad

For Cubist, the sweet spot is people who have finished grad school or a Ph.D. program, or hiring laterally — top pools of talent that are increasingly coveted. Big-name tech companies offering massive salaries right out of grad schools are tough to beat, and these Silicon Valley mainstays have more name recognition thanks to their consumer brands.

Tandon said funds would offer a chance for a quant finishing grad school to work on something that feels "more fintech-y" to lure them in. He pointed to Goldman Sachs' new credit card with Apple as an example of a project that would catch the eye of sought-after coders.

Other shops have borrowed from the Silicon Valley playbook and are holding hack-a-thons, where programmers and coders work in a team to solve a problem or create a design in a set time, with a cash prize and a job offer on the table for the winners, said Jonathan Doolan, a principal at Deloitte's consultancy Casey Quirk. Citadel, for instance, holds an annual competition where top students attempt to solve problems with real-life datasets for a chance to win $100,000 and an interview with the firm. 

At Cubist, Garon believes the immediate feedback from the market or clients on an idea is a big selling point for finance over Silicon Valley.

"You're going to see every aspect of the process, from data to signal to portfolio construction to execution and results," he said.

When you're researching a trading strategy, it's possible that it gets deployed within weeks or even days, and "you get immediate feedback from the market whether you did a good job or not," Garon said.

See more:Inside the Chicago hedge fund turf war between billionaire Ken Griffin and Dmitry Balyasny

Hot commodity

Poaching quants from a rival fund is a challenge for reasons both technical and not. The reliance of quant portfolio managers on their systems, technology infrastructure, and data make them harder to poach than a traditional stock-picker, and hedge funds are increasingly saying that retaining their top talent is a top focus.

EY's annual survey of its hedge fund clients found that one-fourth of respondents listed "talent management" as their No. 1 strategic priority — only "asset growth" received more first-place votes. Most firms put it as a top-three strategic priority.

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A recruiter at a top quant firm said it takes a new quant portfolio manager anywhere from three to nine months to start trading because of the systems, data, and software that has to be pulled together. By comparison, a traditional long-short portfolio manager can get going on their first day.

Michael Graves, who was a top portfolio manager at Cubist and is starting his own fund, said he was hoping to keep his team small and looking at "really niche-y roles" that can only really be filled by recruiting from other managers.

"I'll say I am looking for a short-term futures guy with Python [coding abilities] and two years' experience, and once you narrow that down, there's really only like five or 10 guys out there that fit the bill," he said.

"There's just not a lot of supply" of that type of experienced person, he said, adding that his team has looked into "alternative ways to recruit," like LinkedIn campaigns over using traditional recruiters, which can be pricey for a startup.

To get people from top funds to join a new fund, "you have to offer at least the same amount of money in both compensation and in capital, and a cooler environment," Graves said.

"We like to tell people that you can come here and do cool shit, make a little money, and make people happy," he said.

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• Faron Schonfeld, COO of the Citadel's Global Equities arm, and Brian Conn, a longtime portfolio manager, are both leaving Ken Griffin's firm, sources tell Business Insider.
• Citadel has wooed several money-managers from rival Point72 with large pay packages, according to a media report.
• Griffin's firm, which manages $32 billion, previously lost the leader of its stock-picking Aptigon business, Eric Felder, when the unit was closed earlier this year. Several portfolio management teams were reassigned to the Global Equities unit after Aptigon's closure. 
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Ken Griffin's Citadel is losing an executive and a longtime portfolio manager from its Global Equities business, sources tell Business Insider.

The departures come soon after a report that Citadel has poached money managers from a major rival — Steve Cohen's Point72. 

Brian Conn, a portfolio manager covering financials for the Global Equities business, had been at Citadel since 2006, according to his LinkedIn, and is leaving the $31 billion hedge fund for personal reasons, a source familiar with the situation said. 

An analyst on his team, Alex Ofsevit, has been promoted to fill his role.  Three other analysts in Global Equities — Cole Patterson, Karl Richter, and Mark Wienkes — were promoted to portfolio managers this year. 

"We are grateful to Brian for his contributions over the past nearly 14 years and wish him well," a Citadel spokesman said.

See more: Inside the Chicago hedge fund turf war between billionaire Ken Griffin and Dmitry Balyasny

Faron Schonfeld, the COO of the Global Equities business, is also planning to leave Citadel, sources said.

Schonfeld, according to his LinkedIn, has been at Citadel for more than four years after more than a decade at Accenture. A source close to the firm said Schonfeld's replacement has not yet been named, and that Schonfeld will stay on for an interim basis until his successor is determined.

Citadel's flagship fund was up 13.5% for the year through the end of June. A source said all five strategies were positive for the year, and that the two resignations were not related to performance. 

Citadel's Global Equities team grew significantly after the firm cut its Aptigon stock-picking unit earlier this year. 

Aptigon, which was run by Eric Felder, was shuttered just two years after launching, and the teams that stayed on at Citadel were spread across Global Equities, Ashler Capital, and Surveyor Capital. 

See more: A bunch of hedge fund managers featured in 'The Big Short' are among the casualties of Citadel's most recent cuts

Citadel has also been aggressively adding tenured money managers. According to the recent Wall Street Journal report, Griffin's firm has poached David Corwin and Justin Lubell — the latter of whom ran a $1 billion book focused on technology — from Point72. 

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• Business Insider compiled a list of the people leading the most innovative and ambitious tech projects at Wall Street's biggest firms.
• We asked Wall Street players and industry insiders who was spearheading the most cutting-edge tech initiatives. 
• The list includes eight people who are heading up teams or projects at a range of the largest banks, hedge funds, asset managers, and exchanges. 
• Click here for more BI Prime stories. 

Take a quick scan of the headlines on any given day, and it might seem as if startups are driving the most interesting tech developments on Wall Street. 

It's a fair assumption, as venture capital money continues to pour into fintechs and even the biggest banks are getting in on the funding action. 

However, for all the talk of large financial firms being slow to innovate and adapt to changing times, the top players have still managed to create their own cutting-edge projects in-house. 

Business Insider canvassed the most powerful firms on Wall Street — including banks, hedge funds, asset managers and exchanges — as well as other insiders to discover who exactly is leading the most innovative projects and teams at the biggest players.

Here are the eight names that emerged and the ambitious projects they're working on, including massive tech integrations and building out entirely new banks. 

Ali Villagra, global head of Citi Velocity

As Wall Street pushes for more simplification and returns to a world of bundled offerings, Villagra and Citi's Velocity institutional trading platform are in prime position for continued success.

A combination of web-based analytics that cover everything from stocks to municipal bonds make Citi Velocity an ideal product for an increasing amount of investors looking for a one-stop shop. 

Villagra, who joined Citi after graduating Dartmouth in 2001 as an analyst looking at debt capital markets, has spent the past nine years building out Citi Velocity. In August, she took over as its global head. 

A big part of Villagra's job is staying ahead of the curve to meet client's evolving needs. Citi Velocity's push into API offerings is a prime example of that, and further indication of Wall Street's obsession with data. APIs allow investors to more easily connect data streams to applications. 

Villagra also has other ways of staying up-to-date on the latest innovations, as she serves as the chairman of the board of FINOS, an industry group which supports the use of open source in financial services. 

David Woodhead, technical strategy lead for BlackRock's Aladdin Studio

What's one of the best ways to keep customers happy with your product? Give them the power to tweak it as they see fit. 

That's what Woodhead is helping investors do with one of BlackRock's crown jewels — its Aladdin investment management platform. Woodhead leads the technical strategy for Aladdin Studio, a suite of tools allowing engineers to open up the end-to-end operating system that has long been one of the most-prized technology assets of the nearly $7 trillion asset manager. 

Currently, more than 3,000 developers are using Aladdin Studio, working on investment research, analytics, and the automation of day-to-day processes within Aladdin. With an increased focus on data on Wall Street and a workforce that has the technical ability to take matters into their own hands, Aladdin Studio has proven to be a valuable tool for many. 

Recently, Woodhead's team has worked to grow Aladdin Studio even bigger thanks to a wider adoption of open-source technology. The result has allowed users to automate repetitive tasks with the Python programming language and create more AI-based tools. 

Hari Moorthy, partner at Goldman Sachs

Moorthy is tasked with building out a business from scratch for Goldman Sachs, but it's likely not the one you've heard of.

Marcus, Goldman's consumer-finance offering, has garnered plenty of media attention since launching in 2016, but Moorthy' work building out a commercial bank could end up being a bigger business for Goldman. 

Moorthy, who returned to the bank in 2018 as a partner after serving as a managing director at JPMorgan for four years, has been tasked with building out a payments business to help corporates manage money. As with Marcus, Moorthy's work represents a departure from what has long been the bank's bread and butter — mergers and acquisitions and helping company's raise money.

Moorthy has his work cut out for him, as commercial banking is dominated by sprawling existing businesses at two of Goldman's biggest rivals: JPMorgan and Citigroup. However, Goldman certainly hasn't been afraid to put resources behind the effort. In February, the Financial Times reported Goldman had hired 100 employees to work on the project. 

Matthew Granade, chief market intelligence officer at Point72 Asset Management

As Point72 Asset Management's chief market intelligence officer, Granade has the difficult task of leading the team responsible for combing through huge amounts of data to find information that the hedge fund's portfolio managers and analysts can turn into trades. 

That's no small undertaking in any case, but it's especially difficult considering the fact that Point72, which manages $14 billion in assets, prides itself on being one of the most sophisticated firms when it comes to its digestion and analysis of data. 

Granade, who has been at Point72 since 2015 and also spent more than five years at rival Bridgewater Associates, isn't just focused on the quantitative side. He also leads Point72's "person + machine" strategy, which includes a mixture of both humans and algorithms. The idea behind the hybrid approach is to combine the strengths of both sides to create the best investment opportunities.

Debra Herschmann, head user experience at JPMorgan's corporate and investment bank

For all the focus around technology making trading faster and smarter, there is still something to be said for how good a product looks and how easy it is to use. 

Herschmann's purview is exactly that, as she leads the digital experience design team for JPMorgan's corporate and investment bank. Herschmann came to JPMorgan in 2016 after spending nine years at Goldman Sachs, most recently serving as the head of corporate and investment bank user experience. 

At JPMorgan, Herschmann has grown her team from 20 to 125 in the past two years and is involved in more than 60 projects across the corporate and investment bank. 

Recent accomplishments include making Algo Central, JPMorgan's algorithmic execution tool, easier to follow and use via data visualization techniques. Same goes for Activism Insights, a tool meant to help investment bankers predict the influence of activist investors. Designers created a framework to reduce the time required by users to gather insights and analysis from the tool. 

Chris Woolley, director of trading at Man Group

As financial markets become ever-more complex — with investors trading in new ways and on a growing number of venues — the importance of being able to execute trades efficiently is critical. Enter Woolley, who serves as the director of trading at Man Group, a role that includes leading the Adaptive Intelligent Routing (AIR) project. 

AIR uses machine learning to understand the best route for a trade, tapping into historic trade and market data to help improve the firm's ability to execute at the lowest possible cost. Doing so also allows traders to focus on more complex trades, such as those done in the over-the-counter space, which are typically harder to execute. 

AIR was initially implemented in financial futures in 2017, and Woolley has been tasked with expanding it across different financial products. Last year, AIR was deployed in cash equities and foreign exchange. Next up for the group is credit. 

Ari Studnitzer, managing director for technology and product management at CME Group

Tech integrations are tricky under any circumstance, but Studnitzer's task at CME Group is particularly impressive.

Following CME Group's $5 billion acquisition of NEX back in November 2018, Studnitzer is leading a team focused on integrating BrokerTech and EBS, venues for trading US treasuries and foreign exchange, respectively, onto the larger CME Globex system. 

That will create a single place to transact in futures, options, cash and OTC products. Even more importantly, by creating a one-stop shop, the project has the opportunity to create cross-asset savings, whether it be in data, clearing, or other areas.

Studnitzer, who has been with CME since 2002, also has a hand in the newest potential technology out of the exchange, as he manages CME Group's tech labs.

One specific area of interest for Studnitzer has been his work creating CME's corporate strategy around cloud usage, both for data and applications. 

Jonathan York, Bridgewater's chief architect and head of product for client service technology

York has spent the better half of a decade working on Bridgewater's client-facing platforms and technology. The goal is to offer up the best data, analytics and visualization tools to the clients of the firm, which manages $150 billion in assets. 

Analytics, in particular, has been an area of focus for York and his team. Investors are eager to make sense of the swaths of data available to them, and Bridgewater is able to do that thanks to a personalized and secure web channel they can access content through. 

York's team will also look to continue to improve the digital experience of its clients, as it aims to make the experience as customizable as possible.

No stranger to creating tools and systems geared to a customer, York spent time at vendor SunGard and ratings agency S&P before joining Bridgewater in 2013. 

• Some of the biggest funds are pumping money, technology, and time into building out credit quant teams, sources tell Business Insider. 
• Firms like Steve Cohen's Point72, Renaissance Technologies, and Millennium have all built out their teams as they try to apply their expertise in quant equity and FX trading strategies to the $9.2 trillion world of US corporate bonds.
• Recruiters tell Business Insider that firms are unsure of what to look for when hiring for these roles because "it's just so different from the equity space." 
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Some of the world's largest quant funds are working to turn their mathematical wizardry to a market that has long remained outside their reach: Bonds. 

Point72, Renaissance Technologies and Millennium Management are among a growing group of hedge funds hoping to leverage their expertise in analyzing large chunks of data to systematically trade US corporate bonds in what they believe could be a big opportunity in a market valued at $9.2 trillion in 2018.

Even those funds without a background in quantitative strategies are looking to take a more data-driven approach to credit trading.

Ben Hodzic, an executive director of North America at recruiter Selby Jennings who focuses on quantitative placements, told Business Insider of the top 10 credit hedge funds in New York, 80% of their open roles require a quantitative background. 

"There is really no more landscape to hire traditional credit analysts," he said. "Just about every credit hedge fund is a lot more geared toward hiring quantitative talent."

Bond trading's electronic shift created an opportunity

The increased interest in bond trading isn't a coincidence. It comes as the market is going through a revolution. For years, credit trading was almost entirely relationship-based, with everything done over the phone and a handful of the largest banks maintaining the most significant market share. 

The rise of electronic marketplaces such as MarketAxess and Tradeweb in recent years has led to drastic change, as an increasing amount of trading is done electronically. As a result, data, the lifeblood of any quantitative strategy, has slowly become more available thanks to trades moving from phones to computers. 

Market makers, especially those maintaining large businesses trading fixed income exchange-trade funds, have already taken notice, as firms like Jane Street and GTS have started to push into the space. 

And now, too, so are quantitative hedge funds, hoping to systematically trade corporate bonds the same way they do equities and foreign exchange: Using a sophisticated proprietary pricing engine to find discrepancies in how the market is pricing securities. 

Point72, the Stamford, Conn.-based hedge fund run by Steve Cohen, who is currently in talks to acquire 80% the New York Mets, is building a team out of its Cubist Systematic Strategies group. In July, the firm posted a listing for an execution trader to work with the Cubist portfolio management team "specializing in the systematic trading of US credit markets."

The role was explained as, "an opportunity for someone with expertise in sourcing (electronic and voice) liquidity in the credit markets and piloting automated trading systems to take a central role on the front lines of the team's investment process."

A spokesperson for Point72 declined to comment. 

Meanwhile, Long Island-based Renaissance Technologies was one of the first adopters of a tool released in August by Bloomberg, which also operates an electronic market for trading bonds, that helps firms predict if a corporate bond's spread will widen or tighten, according to sources familiar with the matter.

An Institutional Investor piece from 2017 lays out just how long the secretive hedge fund has been working on this — this story starts by noting that the firm "has had near real-time prices on corporate bonds and other debt for years."

Through a spokesperson, Renaissance declined to comment. 

Millennium Management is also investing resources in building out a team that can trade bonds in a systematic way, according to multiple sources. Billionaire Izzy Englander's firm also declined to comment. 

Staffing quants to credit teams has proved difficult

Despite these firms' history of making billions of dollars through quantitative investing strategies, the credit market has proved to be a tricky endeavor. Firms have quickly learned trading bonds is not as simple as slightly reconfiguring systems designed to trade stocks or FX.

At its core, systematic trading is about quickly understanding if the market is under or overvalued and acting on it, all through the use of complex algorithms. To do that, one must first establish the notion of what the right price is.

But pricing credit is a far cry from FX or equities. Unlike a particular stock or currency, a bond might only trade once a day, requiring investors to consider how to trade it in a completely different way. 

"There is a false narrative that you can take an FX system or an equity system and apply it to credit," a veteran of the credit industry told Business Insider. "You need to warehouse risk in credit where you don't in other asset classes, which means you therefore need to price risk from a warehousing perspective not from an instantaneous transaction perspective."

As a result, staffing for such projects has proved competitive, according to sources. Vickram Tandon, a partner and founder of A-Squared Search, told Business Insider that funds are looking for "old-school" quants to take up these roles. 

Because of the lack of data in the credit space compared to the equities market, machine-learning specialists and artificial intelligence designers aren't going to be of much use.

Tandon said people that were building mortgage models a decade ago at big banks like JPMorgan and Morgan Stanley who have now shifted into risk roles at banks and insurance companies are surprisingly solid candidates if they've kept up with the technology.

"It's just so different from the equities space," he said. 

Ideally, a quant with a background in credit trading would be the perfect candidate. However, because the industry lacked significant data for so long, few have entered the space, instead gravitating towards markets with an abundance of information such as equities, FX or commodities. 

As a result, Hodzic said hedge funds looking to bring quants onto their credit trading desks have typically gone two routes.

One is to hire recent PhD graduates with no experience trading at all with the belief the knowledge of the asset class can be taught quickly enough. The other is to hire credit-trading veterans that have learned computational skills later in life. 

"I don't see very much success, personally from our placements, in people coming from an equities background or maybe even a commodities background," Hodzic said. "I think what it comes down to is liquidity. If you are working in a very liquid market, chances are you can move into another asset class that is equally as liquid. If it is not that case, then you are working with a very different beast when it comes to data and speed of technology."

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• The hedge funds to watch in 2020 are a mix of big names, newcomers looking to make a splash, and a long-time industry player giving it another shot. 
• Big-name macro managers like Brevan Howard will be in the spotlight thanks to the tricky geopolitical puzzle posed by 2020 and the closure of long-time macro player Louis Bacon's Moore Capital.
• Newcomers include former Viking chief investment officer Ben Jacobs and his planned fund Anomaly Capital, as well as former Cantor Fitzgerald boss Shawn Matthews' Hondius Capital.
• Click here for more BI Prime stories. 

Investors are fleeing the hedge fund industry, pulling out billions more every quarter than they are putting in.

But there are still managers who are thriving, as well as big names that are re-entering the space or picking it up again after a tough stretch. Despite the tough launch environment, new funds are popping up with promising pedigrees and big backers. 

Still, the realities of the industry have hit both big and small funds.  Industry experts — like billionaire Stanley Druckenmiller — expect the manager count to continue to shrink. Returns have largely underwhelmed investors thanks in part to the increasingly efficient public markets, which have forced more funds to dive into the murkier private space, where returns can jump sky-high and then be cut down in record time. 

The managers to watch in 2020 are all battling the same headwinds — they are just attacking it from their own perspectives. 

SEE ALSO: What it's like to launch a hedge fund when even the biggest managers are struggling and long-short equity is a 'dirty word'

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Cinctive Capital

One of the biggest launches of 2019, Cinctive Capital is trying to break into the ultra-competitive multi-strategy space where funds like Millennium, Citadel, and Point72 battle for talent and assets. 

The founders of Cinctive of course know this, with ties to many of the biggest names in the industry. Rich Schimel and Larry Sapanski worked for billionaire Steve Cohen at Point72's predecessor SAC before founding their own fund, Diamondback, in 2005. 

Diamondback grew to nearly $6 billion in assets but was targeted by federal authorities as a part of the insider trading crackdown that forced Cohen to leave the industry for two years. One Diamondback portfolio manager was convicted of insider trading, but the charge was overturned on appeal. The bad press, though, forced Diamondback to close. 

Schimel then worked for Ken Griffin at Citadel, leading the now-closed Aptigon unit, while Sapanski set up his own fund, which he converted into a family office. Now, with seed money from one of the country's biggest pensions and more than a dozen PMs, Cinctive is looking to break through in 2020 during its first full year of trading.  

Brevan Howard

Alan Howard's renewed commitment to investing has investors excited about the potential for long-running macro fund Brevan Howard in 2020. 

With the U.S. presidential election and the continued fall-out from a possible Brexit, macro fund managers with the golden touch will be in high demand as investors look to navigate their portfolios through political uncertainty. 

Howard, the billionaire co-founder of Brevan Howard, gave up his CEO gig to focus his energy entirely on the investment side of things after the fund lost more than $20 billion in assets since 2013. 

Since 2013, the firm's master fund has not returned more than 12.4% in a year, and lost money in 2014, 2015, and 2017. 

Marcato Capital

While Bill Ackman had a record-breaking 2019, one of his proteges is limping into 2020.

Mick McGuire, who founded the San Francisco-based Marcato Capital in 2010, has lost a huge chunk of his assets; the firm managed more than $3 billion in 2015 after the successful activist campaigns against Sotheby's and Buffalo Wild Wings. 

This summer, The Wall Street Journal reported that Marcato's assets had fallen to roughly $250 million as investors were turned off by a disastrous 2018, when the fund lost 42%. The reason for the crash was a failed bet Terex Corporation, according to the report. 

While activists like Third Point's Dan Loeb had a solid year, the field is still prone to big swings between sky-high returns and bottoming out. McGuire's former boss, the billionaire Ackman, is a great example, as his fund produced its best year on record after losing money the last three years. 

Hondius Capital

Hondius Capital, started by former Cantor Fitzgerald broker-dealer head Shawn Matthews, is also on the radar for investors looking for new blood. 

Matthews' macro fund made money in a turbulent August for the hedge fund industry, sources say, which has generated more interested in the Stamford-based manager. 

It's Matthews' first fund, after he ran the broker-dealer for the boutique bank for ten years, and he received seeding from his former employer to start it. While Matthews originally planned to raise $500 million, a regulatory filing from July of this year put the firm's assets at less than $150 million. 

Anomaly Capital

O. Andreas Halvorsen has lost two chief investment officers in the last three years, and the most recent departure is going to be one of the most important managers to watch in 2020.

Ben Jacobs, who took over as co-CIO when Daniel Sundheim left Viking Global Investors in 2017, is launching his own fund, which sources have told Business Insider will be named Anomaly Capital, in the second half of next year. 

Sundheim's launch of his D1 Capital in 2018 was one of the biggest in hedge fund history, with $4 billion in assets before trading. The appetite from investors for Jacobs' new offering might be a signal into the broader health of the industry — traditionally, people have clamored to get into well-pedigreed funds like this. 

Perceptive Advisors

Perceptive Advisors founder and billionaire Joseph Edelman is one of the most well-known healthcare investors in the world, so eyes will be on his fund as the U.S. presidential election revolves around the future of health insurance. 

But his firm also had a newsworthy 2019; after the firm's $1.3 billion Life Sciences fund lost money in 2018, it has returned more than 30% this year through the end of November, despite losing 9% in August. At the end of the year, firm also announced a new venture fund, seeded with $210 million. 

The venture fund will focus on start-ups in the biotech space, and is another example of hedge funds leaking into the private space. 

Point72 Asset Management

In Steve Cohen's first full year of trading outside capital again after his ban from managing outside capital, Point72 performance was solid, besting several of his fellow multi-strategy giants.

But it was news outside of monthly returns that heralded Cohen's full return to the industry. He got entangled in the war for talent in the industry, with a story in The Wall Street Journal noting that he refused to shake the hand of an employee leaving to join rival Ken Griffin's Citadel. He was revealed as the buyer of a $91 million Jeff Koons' sculpture, a three-foot-tall stainless-steel rabbit. 

And Cohen is in the process of buying the New York Mets, his childhood team. After the news about the Mets purchase became public, Cohen told investors that while owning the Mets has been long-time dream of his, it will not distract him from the fund. 

Appaloosa founder David Tepper turned his fund into a family office soon after buying the Carolina Panthers, as he wanted to dedicate more energy to the team, but several big-name finance folks continue to run their businesses while owning a sports team, like Avenue Capital and Milwaukee Bucks' co-owner Marc Lasry. 

Mudrick Capital

Jason Mudrick eponymous firm was flying high at the beginning of 2019.

The firm's big bet on vape-maker NJOY Holdings pushed returns to the top of the industry, but a rash of vaping deaths and subsequent regulatory scrutiny has depressed the valuations of all the major vaping companies, including Juul, which has faced the most backlash. 

Mudrick, who invests in distressed securities, bought a majority stake in NJOY in 2017 when the bankrupt company was valued at $40 million, a move that looked like a stroke of genius when the company's valuation jumped to $2 billion in May. While it's unlikely the company falls back to its pre-Mudrick valuation, it no longer looks like the home run it once was. 

• Ken Griffin's Citadel posted a 19.4% return in 2019, beating out industry rival Steve Cohen's Point72 fund and its 16% gain, Bloomberg reported.
• Both offices, and the greater hedge fund industry, still lagged behind a soaring US stock market. The S&P 500 notched a 29% return last year, its best annual performance since 2013.
• Griffin and Cohen's rivalry extended beyond traditional fund competition in 2019. At least five of Point72's portfolio managers left the firm for Citadel throughout the year, The Wall Street Journal reported in July.
• Cohen reportedly refused to shake one portfolio manager's hand after he took a job at Griffin's fund.
• Visit the Business Insider homepage for more stories.

Ken Griffin's Citadel posted a 19.4% return in 2019 with its primary multistrategy hedge fund, beating out industry rivals including Steve Cohen's Point72, Bloomberg reported Tuesday night.

Cohen's fund returned about 16% over the year, sources familiar said. Both firms outperformed the hedge fund sector's 9% gain in 2019, according to Bloomberg's Hedge Fund Indices. The offices still lagged behind the greater US stock market, as the S&P 500 notched a 29% return, its best annual performance since 2013.

Citadel's Wellington fund secured gains across all five of its strategies and outperformed peers throughout most of 2019, Bloomberg reported. The firm returned all of last year's profits to its investors, paying out more than $6 billion.

The Wellington fund has outgunned the S&P 500 since its inception in 1990, and also outperformed the key index on a rolling two-year, five-year, and 10-year basis, according to sources familiar with the matter.

Tensions between Griffin and Cohen extended beyond traditional fund competitiveness in 2019. At least five of Point72's portfolio managers left the firm for Citadel through the year, The Wall Street Journal reported in July. The departures upset Cohen, sources told The Journal, and the fund manager reportedly refused to shake one portfolio manager's hand when he revealed he took a job at Griffin's fund.

About 20 portfolio managers in total left Point72 last year, The Journal reported.

Point72 is Cohen's second foray into the hedge fund industry following the closure of SAC Capital in 2016. The first firm was among the most profitable hedge funds in the US before it pleaded guilty to an insider trading scheme in November 2013 and paid $1.8 billion in penalties.

SAC was also known as one of the nation's highest-paying funds, former employees told The Journal, saying that Point72's pay isn't as high compared to Cohen's first firm. Cohen expressed surprise at Citadel's compensation packages and looked for ways to boost payment at Point72, sources familiar told The Journal in July.

Multistrategy funds spread investments across several assets, including stocks, bonds, currencies, and interest rates. Most investment vehicles appreciated through the 12-month period, including oil, gold, and bitcoin.

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• The top 15 hedge fund managers collectively earned $12 billion in 2019, with the top five taking in more than $1 billion each, according to Bloomberg estimates.
• The hedge fund industry generally underperformed the soaring US stock market last year, yet 14 of the 15 funds listed posted double-digit returns.
• Here are the five managers to make more than $1 billion in 2019 in ascending order of earnings, according to Bloomberg estimates.
• Visit the Business Insider homepage for more stories.

Hedge funds largely underperformed the US stock market in 2019, yet five managers earned more than $1 billion last year, Bloomberg reported Tuesday.

The top 15 hedge fund managers collectively earned about $12 billion in 2019 as central bank rate cuts, strong earnings reports, and deescalation in the US-China trade war boosted nearly all risk assets. The S&P 500 gained 29% last year, while the hedge fund sector saw an average 9% uptick, according to Bloomberg's Hedge Fund Indices.

The past year also saw passive investing platforms continue to gain market share, pulling in clients with low fees while the hedge fund industry shank for the fifth year straight. Yet the top fund chiefs still enjoyed hefty profits as wealthy clients looked to smaller offices and unique strategies to deliver gains.

Bloomberg used Securities and Exchange Commission filings, past reporting, firms' websites, and past calculations for the Bloomberg Billionaires Index to estimate managers' 2019 earnings. The outlet assumed a 2% management fee and 20% performance fee for firms not disclosing fee information. Bloomberg's estimates included only the largest and "most material" funds within each firm.

Not all of the top 15 managers' top funds eked out positive returns over the past year. Bridgewater founder Ray Dalio brought in $1.3 billion less in 2019 compared to the year prior as his flagship fund lost money for the first time in 20 years, according to Bloomberg. All other managers in the top 15 brought in at least double-digit returns through their main funds.

Here are the top five hedge fund managers in order of ascending income in 2019, according to Bloomberg estimates.

5. Chase Coleman

Company: Tiger Global Management

Main fund return: 33%

Income: $1.105 billion

4. Steve Cohen

Company: Point72 Asset Management

Main fund return: 16%

Income: $1.26 billion

3. Ken Griffin

Company: Citadel

Main fund return: 19%

Income: $1.5 billion

2. Jim Simons

Company: Renaissance Technologies

Main fund return: 14%

Income: $1.73 billion

1. Chris Hohn

Company: TCI Fund Management

Main fund return: 41%

Income: $1.845 billion

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• The head of Point72's Cubist unit, Ross Garon, is retiring and leaving the firm at mid-year, according to a memo from billionaire Steve Cohen sent this morning.
• Previously, Garon worked at D.E. Shaw, one of Cubist's main competitors, and founded his own hedge fund, Tykhe Capital, which was named after the Greek god of fortune.
• Garon joined Point72's predecessor, SAC Capital, in 2009.
• Visit Business Insider's homepage for more stories.

One of Steve Cohen's top quant investors and head of the firm's Cubist unit is leaving the firm in the middle of the year, according to a memo sent by Cohen this morning that was seen by Business Insider.

Ross Garon, who joined Point72's predecessor SAC Capital in 2009, is retiring after more than a decade leading of Cohen's quant strategies. 

Garon previously worked for D.E. Shaw, one of the other prestige quant hedge funds in the industry, and founded his own fund, Tykhe Capital, which was named after the Greek god of fortune. 

The memo, which was confirmed by a spokeswoman for the firm, states Garon will work with the firm to find his replacement. While quant funds had a tough 2019, with long-time players like AQR and WorldQuant struggling alongside new entrants like Philippe Laffont's quant-only strategy, Point72 had a strong year, according to the memo.

"Ross and the Cubist senior management team have built a platform to attract top talent and allow our systematic PMs, researchers, programmers, and traders to live up to their full potential. As a result, Cubist has consistently produced strong returns and 2019 was no exception – it was the second-most profitable year in Cubist's history," the memo from Cohen states.

"With the business on solid footing, Ross felt that this was the right time to retire from the Firm."

A story in industry publication Hedge Fund Alert on Garon's hire in 2009 notes that he was tasked with running the quant efforts, taking over for Neil Chriss, who had left SAC to start Hutchin Hill. Chriss has since started another quant fund with backing from Millennium founder Izzy Englander after Hutchin Hill closed in 2017. 

In a statement to Business Insider, Point72 said "Cubist remains an important part of our business as we continue to expand the use of systematic strategies across Point72," and that Garon will retire in "the coming months."

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• Billionaire investor Steve Cohen is stepping outside the hedge fund industry and creating a private-markets fund, The Wall Street Journal reported Friday.
• The fund, named Point72 Hyperscale, will act as a hybrid between a venture capital firm and a private-equity fund and focus on companies in the artificial intelligence space, sources told The Journal.
• Hyperscale aims to raise $500 million to $900 million in 2020, with Cohen as its anchor investor.
• The private-markets fund is Cohen's first investor offering outside the hedge fund space. He previously founded SAC Capital Advisors and Point72 Asset Management.
• Visit the Business Insider homepage for more stories.

Point72 Asset Management founder Steve Cohen is looking beyond the industry that minted him billions of dollars and starting his first private-markets fund, The Wall Street Journal reported Friday.

The venture, deemed Point72 Hyperscale, aims to raise between $500 million and $900 million in 2020 before targeting artificial intelligence-focused companies. Cohen has pitched Hyperscale as a hybrid between a venture capital fund and a private-equity fund, sources familiar with the matter told The Journal.

The new unit could also buy majority stakes in companies with complementary technologies and merge the investments, the sources added. Primary targets for Hyperscale include majority stakes in firms with $10 million to $200 million in annual revenue.

Cohen will serve as Hyperscale's anchor investor. Investor fees and timescales are yet to be determined, The Journal reported. The new venture will be operated by Matthew Granade, who led the creation of investment businesses in Point72, focusing on disruptors in the tech space.

Hyperscale is Cohen's first external offering outside the hedge fund industry. The billionaire rose to fame after his first fund, SAC Capital Advisors, beat the S&P 500 for every year but one between 1993 and 2011. The firm shrank soon after pleading guilty to insider trading in 2013, though Cohen was never criminally charged.

SAC was converted into Point72 as a family office in 2014, and the successor fund reopened to external investors in 2018. Point72 managed $16.1 billion at the start of 2020, according to The Journal.

Hyperscale's concept was first tested through Point72 Ventures, a spinoff of Cohen's hedge fund meant to invest the billionaire's capital in startups, The Journal reported. The private-market unit was founded in 2016 and has since added more than 50 companies to its portfolio.

Sri Chandrasekar and Dan Gwak, who operate Point72 Ventures' AI investments, will run Hyperscale's day-to-day operations, according to The Journal.

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• The alternative data industry, which sells the unique datasets used by investors to gain an edge, has seen a boom in recent months due to the coronavirus pandemic.
• Business Insider profiled seven executives at some of the leading hedge funds, banks, and trading shops that are handling their firms' consumption of alternative data. 
• Those profiled detailed how they use alternative data, what types of data they are interested in, and how they like to be pitched by data vendors.
• Visit Business Insider's homepage for more stories.

It's been an interesting 12 months for alternative data.

After a red-hot 2018, the industry faced some growing pains in the latter half of 2019, as multiple alt-data providers restructured their organization. The space overall was going through a massive expansion, and hedge funds were quick to cut feeds that they weren't getting value from.

The same privacy concerns that have nipped at the heels of big tech firms made its way to the industry as well, and consumers of alternative data now had to grapple with data sets suddenly going dark overnight.

However, for all the issues the industry has faced, the coronavirus pandemic — and its impact on the markets — has reinvigorated interest in alternative data. Unhappy with traditional market data, which has failed to keep up with rapidly-changing markets and proved less valuable, investors have turned to these wonky data sets, which include everything from credit-card data to satellite images, for what they believe are timely, unique insights. 

While traditional market data, which totaled $32 billion, still dominates Wall Street's data spend, alternative data continues to require more resources devoted to it.

See more:Credit-card data is broken. Here's how hedge funds and banks are being forced to rethink one of the earliest alt-data plays.

And so with interest in alternative data arguably back at its highest, Business Insider reached out to some of the biggest banks, hedge funds, and trading firms in the world to get a sense of what their alternative data strategy is, the type of data they want, and how they want to be pitched. 

Here are the seven executives handling some of Wall Street's top firms' alt-data consumption. 

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At Balyasny, data serves both quants and fundamental traders

For Balyasny Asset Management, a centralized approach is the key to its alternative data strategy. 

Carson Boneck, the chief data officer at the $7.7 billion hedge fund, said in early 2017 several teams focused on big data, data engineering, and sourcing were all brought together to create the firmwide Data Intelligence Group. The goal of the group is to "help improve the hit rate and velocity of our team's investment ideas and to provide our PMs the very best data platform on the Street," Boneck told Business Insider via email.

The group works with those on both the fundamental and quantitative side of the business. And while the two sides are typically using alternative data in different ways, there are benefits to pooling resources.

In doing so, Boneck said the firm avoids duplicating efforts, instead making the most of its investment. All teams are able to access and share data. 

"With one data team to collaborate with, we've uncovered a multiplier effect in our use of alternative data," he added. "For example, risk arb portfolio managers might use alternative data to track potential M&A transactions and share this with our index [rebalance] portfolio managers to aid in their process." 

Boneck said the firm views any dataset with that same lens, looking at how it can be used in different ways by multiple portfolio managers. 

Not unlike others, Boneck said Balyasny's preference for data formats is to be as raw as possible, leaving the opportunity for the hedge fund's various teams to uncover relationships. It's not uncommon for the manager to work with new data providers on formatting data.

Data history is also critical, he added.

"One important characteristic of all the data we leverage is ensuring the data's history reflects its original form at any historical point-in-time," Boneck added. "When vendors don't provide point-in-time data our Data Intelligence Group creates an in-house version."

Boneck declined to disclose Balyasny's alt data budget, beyond saying it's "significant." 

As for the best way to pitch the hedge fund, details around how data is collected from the source are important, as is its coverage and timeliness. In short, you should know your data back-to-front. 

The firm actually created a self-serve portal, called Antenna, for alt data providers to be quickly evaluated; providers "are able to see descriptive statistics and even the results of risk-aware back tests."

"Datasets which score well in Antenna are fast-tracked for further internal evaluation," he added.

Read more:The chief data officer at $6 billion hedge fund Balyasny explains how to merge quantitative and fundamental trading strategies — and the importance of 'translators' to bridge the gap

Barclays leans on alt data for the nuance it provides

The devil is in the details. 

That's how Ryan Preclaw, who co-leads Barclays' data-science research group, explained his approach to alternative data. The group, which is made up of an investment sciences team and data science team, publishing reports and analysis for the banks' clients. 

"The most exciting thing alternative data offers over traditional data is its granularity," Preclaw told Business Insider via email. "We can provide our clients with actionable insights and answer very specific research questions that would have been impossible in the past."

From investment to retail banking, their is value across the firm in using obscure datasets, Preclaw said. But there is no specific type of alt data that the UK bank targets. Barclays uses everything from geolocation data, which has proved particularly useful in recent months, to open data, which is usually published by some kind of government entity.

However, when it comes to the format the data is in, Preclaw said Barclays made a strategic choice to have data be as raw as possible.

"We want to be maximally flexible in what we can do with it, even though that means a lot more upfront investment in infrastructure, storage, and algorithm development to turn it into useful information," he said. "Raw data has two advantages for us: first, we can get answers to questions that might be impossible if we received data in a pre-processed form; second, it puts us into a position to talk to our clients about the nuances of how to work with alternative data."

While Preclaw declined to disclose the bank's budget for alt data, he did have some advice for prospective providers. First, it's important to provide written material about the dataset before even trying to set up a conversation. When a chat does occur, Preclaw said the bank is eager to understand what the data set is offering "in a very specific way."

"We want to see what a row of your data looks like, what all the features are that you have in it in as plain language as possible," he added.

Transparency is also a top concern, as is simplicity, Preclaw said. Be prepared to explain the process in a concise way. Tech and salespeople are also encouraged to attend the first meeting to provide a 360-degree view of the data, he said. 

Preclaw also had a piece of advice for something to avoid.

"One thing we are NOT interested in seeing is a back test against returns," he added. "Those are so easy to do incorrectly that we can't put any dependence on it unless we've done it ourselves."

See more: How a new Barclays data-science team is fast-tracking research and finding the most useful stats to measure the economic impact of the coronavirus

Bridgewater starts with government data — but has found alt data very useful

The world's biggest hedge fund starts with government data; it's got the longest history and often has clear macro implications.

But Bridgewater, the $160 billion hedge-fund manager run by Ray Dalio, is using alternative data more and more, as it helps "us to understand macro dynamics much more granularly and quickly than traditional government data sources would," according to Matt Karasz, who leads Bridgewater's macro research team.

"This has been particularly useful as we navigated the uncertainty over the last couple of months," Karasz tells Business Insider.

"Large shifts in the economy have occurred outside of traditional 'sector' lines – e.g. consumers shifting from in-person purchases to online and shifting their basket of consumption in response to the virus – and alternative data has been critical to seeing these shifts play out and understanding how the economy is working under the coronavirus," he added.

Alternative data does have limitations, he said; narrow focuses, limited track records, and difficulties ingesting it into systems are all obstacles.

But "all challenges worth overcoming if the data is shedding light on an important dynamic."

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Jump Trading is looking for vendors to have a dialogue with

For Chicago-based proprietary trading firm Jump Trading, data usage is all about refining an "existing predictive pattern or possibly present a new one on its own," Stewart Stimson, head of data strategy for Jump Trading, told Business Insider via email. 

Specifically for alternative data, Stimson said while there is an inclination to focus on its use around equity statistical arbitrage — one of the longest-running quant strategies — it can be used across the firm. What's key, he added, is balance between the number of observations that can be made from a data source and the frequency with which the data is able to help make accurate predictions.

"If the data is high quality, is unique, and has a large number of observations, there's a good chance that we are interested in looking at it," he added.

Jump has also streamlined its consumption of alternative data via a method that normalizes a variety of data structures. As a result, the trading firm has a sliding-scale approach to how quickly it can test a data set.

"While the dream is perfectly structured data in either flat files or a well-defined/architected database, we recognize that part of our ongoing mission in both analysis and talent recruitment is adapting to the curveballs in data structure," Stimson said. 

As far as budget, Stimson said there is no established number. Every dataset is subject to the value established by it during testing. 

The entire process of sourcing data has evolved greatly in the last few years, he added. Overall, he said Jump is always eager to find new data sources. 

During the initial conversation, Stimson said having a data dictionary, which typically details everything about the database, is crucial. He also highlighted two other key considerations.

"The baseline expectations that we look for in a vendor presenting their data is a representation of fidelity to time in their history first and foremost," he said. "We also want an understanding of why the vendor is confident that their data is obtained in a way that grants them license to sell this data, as this helps us evaluate the compliance and source sustainability concerns that we need to understand."

Even if a dataset isn't right for Jump, Stimson said the firm is open to providing some constructive feedback. 

"We believe this two-way dialogue keeps the door open to hearing more from the vendor in the future," he added.

Inside Man Group's 'data mosaic'

Hinesh Kalian, head of data science for the world's largest publicly traded hedge-fund manager, has a big and diverse organization to think about when he is buying outside data.

There's quants and discretionary managers, both trying to understand things about companies, the markets, and the world — before they happen. 

"It's becoming more apparent that traditional data sources typically cannot provide real-time insights into financial and economic health. We are not looking to tackle a specific problem, but rather we are creating solutions to build a data mosaic leveraging a variety of alternative data pieces," Man Group's Kalian told Business Insider.

Read more:'I'd rather turn them into robo cops': Execs from Man Group, Bridgewater, and Schonfeld explain how they're trying to blend humans and machines

He views alternative data, broadly, as slotting into three groups: individuals, businesses, and sensors. 

"In the current environment, it's no surprise that data sources that provide insight into changes in consumer behavior and economic health are very relevant. Data related to consumer spending, footfall traffic measures, consumer sentiment, supply chain dynamics, and employment data are particularly interesting in the current environment."

While pre-packaged data can seem simpler, Kalian said the $108 billion firm has invested heavily in its ability to clean and sort data in all forms; for vendors looking to get Kalian's ear, he recommends to "do your homework."

"If you think you have an interesting product then reach out. It's important to look at this landscape laterally, i.e. even if the data is used in non-financial industries, there is a chance it can be useful to the investment management community."

PanAgora is trying to win a race, and uses data to do it

Lei Liu views investing in equities as "a race to price in all the relevant information"— and sees alternative data as a way to get there first.

A senior portfolio manager for $34 billion PanAgora Asset Management, Liu is trying to use alternative to both find alpha and help with risk management, so the firm can avoid crowded trades.

Liu tells Business Insider that his firm prefers data in that can be plugged directly into Panagora, and the firm's budget is based on a cost-benefit analysis — if the dataset is worth it, the company will consider it. 

For vendors looking for an in, Liu suggests that companies "tell us what is the uniqueness of this data and how useful is this data to gauge" businesses. 

Point72 is focused on answering questions

Billionaire Steve Cohen's $16 billion hedge fund uses a lot of data, from traditional sources to obscure, outside feeds.

Jessica Fiegleman, a member of the firm's Market Intelligence team who runs the data acquisition group, told Business Insider in an email that she focuses "on the fundamental research questions that need to be answered about these companies" when evaluating data feeds.

"We're careful not to narrow our focus on the signals generated from the data," she said. 

The firm declined to disclose its budget for alternative data, but noted the infrastructure it has invested internally lets it take data in any format. Fiegleman notes the firm's analysts, engineers, data scientists, and compliance team are key components to "a successful alternative data strategy."

For people pitching the firm, Fiegleman advises data vendors look to speak on more than just an individual product.

"Our best vendor relationships are collaborative rather than transactional. We love when a data provider can educate us about their product, and in turn, we can be a part of the evolution of their offerings."

Read more:

Troy Gayeski believes that 99% of life is luck. 

"People don't like to admit that but where you're born, which century you're born in, or whether you grow up in places where you have very little economic opportunity," he told Business Insider. "It's all just luck."

But hard work, mastery, and skill are things one can control, said Gayeski, co-chief investment officer of SkyBridge Capital, the $7.5 billion hedge fund that Anthony Scaramucci launched in 2005.

Gayeski, an engineer-turned hedge fund manager, has carried his life philosophy into investing. In managing SkyBridge's flagship fund of funds that invests wealthy people's money into other hedge funds, he seeks to exploit market inefficiencies and find managers who can add value via niche opportunities. 

"Our thought process and philosophy has always been based on where there's inefficiency, where there's opportunity, and where managers can actually generate alpha to justify their fees and expenses," he told Business Insider.

In a market environment where stock returns are at a record high and bond yields are near historic lows, Gayeski sees "tremendous opportunities" in structured credit, which refers to packaging similar debt obligations into a pool and then selling off the resulting cashflows. 

Structured credit products span from commercial real estate to consumer credits, but Gayeski is most bullish on the residential mortgage-backed securities space. 

"We were very constructive on housing credit coming into the pandemic and immediately there's been some deterioration," he said. "But if you think of where forbearance requests have gone, where home prices have evolved to, where mortgage rates are, and look at where supply-demand is and housing in general. You almost couldn't have a more constructive case on mortgage credit here."

In the depths of the crisis, delinquency requests were expected to spike to 15% but they peaked at 9% and have now dropped to 7%, Gayeski explained. At the same time, home prices continue to appreciate despite the pandemic while mortgage rates have slid to a record low of 2.8%, he said.

On top of those conditions, there is an extremely tight supply of houses, between 3.1 months for existing sales and 4 months for all homes including new construction, which is pushing housing prices higher. 

"We think that's a very rich opportunity with less risk," he said.

Convertible bond arbitrage, which involves taking long positions in a company's available convertible bonds and short positions in its underlying stock, is another opportunity that Gayeski plans to ramp up over the next 2 to 3 months. 

"It's in a very sweet spot right now," he said of the strategy. "Depending on the month, issuance levels are growing three to six times where they've averaged the past five years."

Investors can also hedge stock market volatility with such a strategy, Gayeski pointed out. 

"When you get equity sell-offs, the converts tend to behave as synthetic puts, meaning you have premium expansion," he said. "So unless you get another disastrous outcome ... even in down markets, as long as they're contained, there will be positive return expectations." 

At the onset of the COVID-19, SkyBridge ramped up its holdings of distressed corporate credits, meaning the bonds of companies that have filed for bankruptcies or are on the verge of doing so, to 11%. But they stopped allocating to the strategy a few months ago. 

"When you looked at more rational expectations for default, you could see $500 billion to $800 billion in default securities over the next several years," he said.

"But the fiscal stimulus and the Fed intervention have really lowered those default forecasts meaningfully until it looks like we'll probably have closer to $300 billion or maybe $400 billion in default securities. So that's something that we will more than likely start reducing at year-end."

Betting on hedge fund titans 

To find the best expressions of his investment views, Gayeski and his team are betting on hedge fund luminaries with real capital. 

In the multi-strategy space, the firm has a meaningful position in billionaire investor Dan Loeb's Third Point Ultra fund. 

"Dan toggles back and forth from credit, equity, activism, and just passive investing and structured credit versus corporate credit, and then occasionally will take some international positions," he said of Loeb's investing style. "That looks robust mainly because of the still-very-attractive opportunities in structured credit as well as high degrees of dispersion in equity markets."

Another big name in the portfolio is Steve Cohen's Point72 Asset Management. 

"The Point72 style is high-growth, mainly multi-PM, long/short," he said. "For most of the post-crisis period with the exception of 2013, 2016, and this year, you've had very modest degrees of dispersion and higher correlations between equities. You still have higher correlations but dispersions have been fairly significant, and so that strategy looks very attractive."

To execute the view on distressed corporate credits, the firm allocated capital to Josh Friedman's Canyon Partners. 

"We've known Josh for years and he is a tremendous distressed investor," Gayeski said of the decision to add to the Canyon fund in April. "He has had his second-worst drawdown ever and had a lot of good value in the portfolio, whether it was structured credit or corporate credit and he's had a nice run as well."

Muted returns 

With "the tremendous reflation of equities" and "fixed income offering very little return," Gayeski believes investors should set realistic goals and expect more muted returns ahead. 

"The best thing to do now is to look for alternatives with high single-digit like returns and in the near term that can run circles around fixed income and give equities a run for their money over the next 3 to 5 years as well with far less downside," he said. 

To be sure, SkyBridge's fund of funds was down 24.7% in March and had significant redemptions in April. The fund bounced back in July, though it's still down 19.29% this year, according to an investor letter. Its 4.6% annualized return since inception in 2003 is three percentage points ahead of its benchmark.

The halcyon days during which the hedge fund industry grew from several hundred billion to $3 trillion may be over, but investors can still generate alpha by picking the right strategies. 

"It's so hard to generate returns other than just owning equities and hoping they keep going up forever. Even if the hedge fund industry can only generate 4% to 6% returns in the next 3 to 7 years," Gayeski said.

"That's going to look very good versus any type of fixed income opportunity, so on that side alone, we think that means the industry continues to offer an attractive option for institutional investors and high-net-worth investors."

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For someone who worked at the White House, albeit just for 11 days, Anthony Scaramucci has a surprisingly contrarian view about election-related market risks. 

"I think it's sort of a toss-up between the two candidates as it relates to the stock market," said Scaramucci, founder of the $7.5 billion hedge fund SkyBridge Capital, in an exclusive interview.

His view that election-specific risks are negligible for investors runs counter to the reams of guidance that Wall Street strategists have published in recent months to help investors prepare their portfolios. From stock lists geared towards either candidate's victory to scenario planning for a contested outcome, experts are providing specific advice. 

Scaramucci hinges his view on his belief that regardless of who wins, the administration-in-charge would prioritize fiscal stimulus.

"Any of these two administrations is going to be looking to further stimulate the economy and to further encourage the Fed to induct more liquidity, and to create a softer or as soft of a landing as possible," he explained. 

The Federal Reserve's policies will not change in the near term regardless of who wins and neither is the economic policy likely to change, Scaramucci said, evoking the continuity of economic policy the Obama administration practiced after taking over from the Bush administration in 2008. 

"I think the Biden administration will do the same thing. People are saying the Biden administration will raise taxes; I don't believe that's the case," he said. "I think the economy is just too anemic to raise taxes. That's not to say that it couldn't be raised after the economy heals, but even in the Obama period, it was impossible basically to raise taxes until the economy healed."

Risks after the elections 

While election risks are not an apprehension to the former White House communications director, there is cause for concern because the US has become a "poorer, weaker and sicker" country under the Trump administration, Scaramucci said. 

"Our allies and our relationships with them have been frayed and he's hurt the trade balance," he said. "You've got the COVID-19 situation, which I think just based on empirical data and comparative analysis, you'd have to say that there have been flaws in the administration's decision-making."

Even though President Trump has repeatedly boasted about stock market rallies during his tenure, Scaramucci said the market is not an accurate measure of his success. Only 52% of American families are invested in the stock market through their 401(k) plans or retirement accounts, according to the Pew Research Center.  

"If you look at the unemployment data, it's worse than it was during the Obama administration. We have 200,000 people now dead from COVID and we're closing in on seven million people infected with the disease," he said. "The GDP is down, unemployment is up. And so the Fed has helped to prop up the stock market, there is no question about that."

Taking all these factors into consideration, Scaramucci, who usually goes with the political betting markets, has made his prediction

"I think that Joe Biden is going to win," he said. 

Navigating market sell-offs

Aside from his political presence, Scaramucci, who founded SkyBridge 15 years ago, is also responsible for the marketing and sales, compliance and regulatory affairs, as well as other management duties at his firm.

He leaves all investment decision-making to co-chief investment officers Raymond Nolte and Troy Gayeski but helps to connect the dots when needed. 

For example, when billionaire investor Steve Cohen's Point72 Asset Management opened up some capacity during the COVID crisis, Scaramucci believes that his "personal friendship" with Cohen helped SkyBridge secure a spot in the fund.

He is upfront about the underperformance of the firm's flagship fund of funds but he asks investors to stay patient. The fund was down 24.7% in March and had significant redemptions in April. 

"I've always been a long term practitioner of a well-diversified asset allocation plan so I try to tell people to stay the course," he said. "Unfortunately, some people invest emotionally, so they redeem after a bad performance."  

The fund of funds generated an estimated 0.74% net return in the first half of September while the S&P 500 total return index was down 2.75% during the same period, according to an investor letter dated September 17. Though to be sure, the fund was still down 15.50% year-to-date, according to the letter.

"The worst time to be selling us was on April 1," he said. "Our stuff was so oversold technically in March and therefore we think that we have a great opportunity to see lots of upside from here."

Despite the recent volatility, Scaramucci is "long-term positive about the stock market." He said SkyBridge is already reactivating its plans to launch some new products, including a fintech offering, in 2021.

However, he is far from stress-free about the market where his biggest concern lies in the so-called FAANG stocks driving the entire market performance. 

"I think that's a cautionary tale for people to be careful because you can get whipsawed pretty quickly," he said. "These markets are moving like lightning. The month of March to me felt like the entire 18 months of the 2008 financial crisis happened in about 6 or 7 trading days." 

SEE ALSO: Morgan Stanley's US equities chief nailed his call for a short-term market meltdown. He now lays out the evidence that it may not end soon and shares 15 stocks to buy ahead of the rebound.

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• Steve Cohen's Point72 and Ken Griffin's Citadel are investing $2.75 billion in Melvin Capital.
• Melvin is down about 30% this year as its short positions are getting hammered.
• Day traders have bid up the stock prices of GameStop, Bed Bath & Beyond, and other popular shorts.
• Visit Business Insider's homepage for more stories.

A pair of billionaire investors are swooping in to support a short-selling hedge fund in its battle against an army of irreverent day traders.

Steve Cohen's Point 72, Ken Griffin's Citadel, and other partners are plowing a total of $2.75 billion into Melvin Capital, the hedge funds said on Monday. They will receive non-controlling revenue shares in Melvin in return for their money.

Melvin will welcome the cash injection as painful short bets have left it down 30% year-to-date as of Friday, The Wall Street Journal reported.

Scores of retail investors, including some members of Reddit forum r/wallstreetbets, have targeted heavily shorted stocks in recent weeks. They drove GameStop's stock price up as much as 145% on Monday, Bed Bath & Beyond up 58%, BlackBerry up 48%, and AMC up 39%.

Melvin takes more negative positions than most of its Wall Street rivals, exposing it to potentially heavy losses. It owned "puts"— bets that a stock price will fall — on 17 US-listed companies including GameStop and Bed Bath & Beyond at the end of September.

The firm's strategy has paid off in the past. Melvin has returned an average of 30% annually since its founding in 2014, and had grown its assets under management to $12.5 billion at the start of this year, The Journal said.

Gabe Plotkin, a former star portfolio manager at Cohen's SAC Capital, quit to start Melvin in 2014. He counted Cohen as a day-one backer.

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Another top data executive is out at Point72. 

Kirk McKeown, who led proprietary research at the hedge fund, has left the firm, according to people familiar with the matter and an internal memo seen by Insider.

McKeown, who joined the firm eight years ago and created its Canvas Fundamental Research Group, had been deliberating his departure for weeks and is leaving to start a data and research company, according to the memo.

"Kirk plans to leave the industry to pursue his entrepreneurial interests focused on bringing research and insights to other parts of the world," Point72 founder Steve Cohen said in the memo. "He and I began discussing his next steps at the end of last year, and I look forward to seeing what Kirk does in his new endeavors."

A spokesperson for Point72 confirmed the departure but declined to comment. 

Matt Dowd has been appointed to head of market intelligence, according to the memo. Dowd joined in 2016 after a decade with the FBI, serving as chief of staff in market intelligence and most recently as the proprietary research operating officer.

McKeown is the second senior member of the firm's market-intelligence unit to depart in as many months. 

In early December, Matthew Granade, the head of market intelligence and the firm's Fusion quant portfolio, exited Point72 amid a broader shake-up in which Fusion folded into the firm's Cubist systematic-trading operation. 

Point72 ended 2020 with $19 billion in assets. It raised $1.5 billion at the end of January after losing 10% amid the short-selling chaos that stung Melvin Capital. Cohen invested $750 million into the fund of his former star portfolio manager Gabe Plotkin alongside fellow the hedge-fund billionaire Ken Griffin, who put $2 billion into Melvin.

SEE ALSO: GameStop-ravaged Melvin Capital has an unlikely investor — the partners at the Silicon Valley VC Sequoia Capital that backs retail-trading app Robinhood

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Steve Cohen's decades-long career in finance has made him billions of dollars across two different hedge funds and led to the creation of more than 80 other firms.

Dozens of people who have worked for the famed stock picker — who was forced to close his first fund after a yearslong battle with the Justice Department — have gone on to found their own funds.

Notable names to come from now-closed SAC Capital and Cohen's current fund, the $20 billion Point72, include the founder of the $8 billion fund Melvin Capital, Gabe Plotkin, and the founder of $1.8 billion Honeycomb Asset Management, David Fiszel, as well as shuttered funds like Tourbillon Capital, from the HumanCo founder Jason Karp, and Hutchin Hill, from the Millennium portfolio manager Neil Chriss.

Recent launches include Charlie Antrim's Walnut Level Capital, Ladd Fritz's Polarity Investment Partners, and Jonathan Lin's L2 Capital, while Cohen's former right-hand man Tom Conheeney is still in the process of getting his EmeraldRidge Advisors up and running.

Former employees of the New York Mets owner have started funds around the world, with alumni putting down roots in places like Sidney, Hong Kong, London, and various cities across the US. (Story continues below graphic. A searchable table of the names is at the bottom of the article.)

Cohen's first fund, SAC, was forced to close at the end of 2013, though the liquidation of tough-to-sell assets pushed the closure date off for a few years. As a result of the DOJ's investigation, one of his traders ended up going to prison for insider trading, and the firm had to pay a $1.8 billion fine.

Many employees continued to work for Cohen at his family office, Point72 Asset Management, named after its Stamford, Connecticut, office location, managing his multibillion-dollar fortune as well as their own wealth.

In 2018, after the Securities and Exchange Commission lifted Cohen's two-year ban on managing outside capital, he relaunched his hedge fund under the Point72 moniker and has been growing it steadily since.

Many who have worked for Cohen have also gone on to start companies that have nothing to do with hedge funds. Karp is the most obvious example, with his health-centric food company growing rapidly and signing on celebrities like Scarlett Johansson to consult on products.

The former trader Bill Shufelt also started a food and beverage company, nonalcoholic brewery Athletic Brewing, while Bryan Binder — a onetime portfolio manager at SAC — cofounded the esports tech platform Vindex in 2019. Bree Jones, who was a vice president of data analytics for Point72, started the affordable-housing-focused real-estate development company Parity in Baltimore in 2018.

Since relaunching his hedge fund, Cohen has been focused on talent development as the large multistrategy hedge funds battle one another — and Silicon Valley — for the cream of the crop.

At Point72, this starts for an entry-level analyst with the Academy, the firm's 10-month crash course on all things investing. The firm's Launchpoint program boasts of its ability to help its emerging portfolio managers launch their teams and understand how to run a business.

Stats from the firm's site state that roughly half of the managers to come out of Launchpoint were internal promotions while others came from outside the firm, and more than 80% of the managers who have launched their portfolio using the platform since 2016 are still at the program. 

"I want a place where people can do what they do best and feel free enough to try different things. If we're squashing new ideas, we're going to go nowhere," a quote from Cohen reads on the site. 

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Steve Cohen's Point72 Asset Management is looking to hire a head for its cryptocurrency division, joining the growing number of funds and legacy institutions entering the crypto-ecosystem, Bloomberg reported on Thursday, citing sources.

The move comes after Point72 informed investors in May that it was weighing up the prospects offered by digital assets.

"We are exploring opportunities around blockchain technology and its transformative and disruptive capabilities," the hedge fund said last month in a letter seen by Bloomberg. "We would be remiss to ignore a now $2 trillion crypto currency market."

Point72, which manages about $22 billion, said its crypto-related bets would be made either through its flagship fund or its private investment unit, the Bloomberg report said. 

The company's apparent sharpening interest in digital assets reflects that a number of big institutions are already making their bets. More than 20% of traditional hedge funds, representing $180 billion in assets under management, are now allocating an average of 3% of that money to digital investments, the Alternative Investment Management Association found in a May survey.

Legendary investor George Soros' fund is actively trading bitcoin, The Street reported Thursday. Paul Tudor Jones, founder of the Tudor Investment Corporation, and $14 billion fund Brevan Howard have also moved into the space. In April, Dan Loeb's Third Point revealed its crypto investments with Coinbase. 

A majority of the funds already invested in digital assets intend to put more capital in by the end of 2021, the AIMA survey found. 

"Diversification and exposure to a new value creation ecosystem are cited as drivers for investing in digital assets. This is unsurprising given that hedge funds tend to be early adopters, at the forefront of innovation whilst remaining committed to achieving the best performance possible," its CEO Jack Inglis said in a statement.

Closely followed by his legion of fans, Cohen himself has decades of experience on Wall Street. He founded two hedge funds, one of which, SAC Capital, was shut down in 2013 over insider trading. He is now CEO and chairman of Point72.

Representatives of Point72 declined to comment.

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It's easy for investors to take big bets on companies like Google and Facebook. It's much more challenging to find the fledgling startup that is set to become the next industry titan.

For decades, hedge funds have dominated public markets, through activists demanding major changes at blue-chip stocks or quants supercharging the speed of trading. Now managers are turning toward private markets, investing billions into top startups. 

The patience of many of the hottest companies in the world pulled the industry in. In 2020, 20 unicorns went public, including Airbnb and Palantir. These companies waited an average of 11 years before going public, compared with just five years in 2011, according to an analysis by the Financial Times. 

"To many of our clients, the private markets have become increasingly important over the past few years, and we only expect continued growth in the space," said Tiger Williams, the founder of Williams Trading, a trading-execution firm that has clients in public and private markets. 

Managers like Tiger Global are pumping so much into private markets that traditional venture capitalists are grumbling that they can't find any deals for their own clients, and more firms are expected to get in. A new hedge fund from Alex Karnal and the former Bridgewater executive Brian Kreiter, named Braidwell, plans to invest across public and private healthcare companies, for example.

Insider compiled a list of the top 20 dealmakers at the most important shops. Titles vary from analyst to founder, but all are heavy hitters in their section of the market. 

Scott Shleifer, head of private equity, Tiger Global

While many funds have just recently come around to private markets, Tiger Global has been involved for close to two decades, thanks to Scott Shleifer.

He heads Tiger Global's private-equity investing arm, a practice he cofounded with the billionaire firm founder Chase Coleman in 2003. He was an early investor in China but has invested in startups based in the US, Latin America, India, and Russia, among others.

Since its inception, Tiger Global's private-equity business has invested in more than 400 companies in more than 30 countries and has produced a net internal rate of return of 26%, according to a person familiar with the firm. This year alone, 22 of Tiger Global's portfolio companies have gone public, representing $2.2 billion of investments and about $7.5 billion of gains. 

The success has been good for Shleifer personally as well. He bought one of the most expensive homes ever sold in the US, a $122.7 million Palm Beach, Florida, mansion, earlier this year.

Brian Kaufmann, head of private investments, Viking Global

Another Tiger Cub on the list, Viking Global is one of the biggest crossover firms in the space. The Wall Street Journal reported earlier this year that the manager is planning to raise $1 billion for a dedicated private-equity fund that will close on October 1.

The firm led a $130 million round for the cloud company Druva in 2019 with $107 million coming from Viking alone, pushing the startup into unicorn territory. This year, Druva raised money at a $2 billion valuation as Viking's investment has doubled in less than two years.

Brian Kauffman leads the private-investment team for Viking, and in 2019, the firm told investors that it was adding two members to the five-person team to keep up with demand. The firm also placed early bets on Uber and BridgeBio Pharma, both of which have gone public.

Chris Garabedian, founder of Xontogeny and portfolio manager of Perceptive Advisors' venture funds

Chris Garabedian spent more than two decades working at various biotech companies before switching to the investment side with his startup incubator, Xontogeny.

Looking for capital for Xontogeny, Garabedian had conversations with the healthcare investor Perceptive Advisors, run by the billionaire founder Joseph Edelman.They reached a partnership in which Xontogeny would continue to incubate young companies, but Garabedian would invest within the Perceptive framework via a venture-capital fund. The first fund, which raised $210 million in 2019, was rapidly deployed, and they raised $515 million — with an overall demand of $1 billion — for the second fund, Garabedian said.

The partnership between his incubator and Perceptive has let Garabedian get in early on some of biotech's promising players, such as Bioharmony Therapeutics, which is working to develop treatments to antibiotic-resistant bacteria.

"We can take our best ideas and call up Adam and say we want a read from your best analyst on this," he told Insider, referring to Adam Stone, Perceptive's chief investment officer. "If you like it and we like it, then we know we are onto something. If all goes well, I've already kind of pre-cleared the next investment."

Edwin Jager, head of fundamental equities at D. E. Shaw

The quant giant D. E. Shaw might not be the first firm that comes to mind when you think of private-market investing, but the $55 billion manager invests in the startups through its fundamental-equities strategy, run by Jager. The strategy includes traditional long/short, special situations, activism, and privates, and takes long-duration, concentrated positions, with a fair amount of attention on the technology, media and telecom, including fintechs.

D. E. Shaw looks globally for startup investments, especially in China, where Jager said the firm has found deals through word of mouth from its team in Hong Kong. To run due diligence on potential private bets, the firm uses alternative data sources to get a sense of a company's standing in an industry.

Private investing "has been a focus for our team over the last several years, and we expect it to remain so," he said. Past private investments from the firm include Spotify and the internet-of-things company Altierre, which D. E. Shaw was the lead investor in.

Dan Gwak, managing partner, Point72

Dan Gwak is the point man for the billionaire Steve Cohen on all things private markets. Before joining Cohen's firm, Gwak was a partner at In-Q-Tel, an investment firm that finds technology companies that can support the US intelligence community.

Point72's private-investing business includes two arms — the firm's venture-capital business and Hyperscale, an artificial-intelligence-driven private-equity business. Hyperscale, which started in 2019, uses AI to help its portfolio companies become more efficient and profitable.

The ventures team is more robust, with more than 30 people on the team, the firm said. The business invests Cohen's personal capital as well as that of other Point72 employees, and it has written checks from $250,000 to $50 million since it launched in 2016. Combined, the two businesses have deployed more than $500 million, and investments from the venture side include Privacera, Acorns, DriveWealth, and dozens of others.

John Curtius, head of software investing, Tiger Global

A member of Business Insider's 2020 list of rising stars in finance, Curtius is well known to private software companies looking for their next infusion of capital.

The Los Angeles native got his feel for the private markets when he started his career at the private-equity firm Silver Lake before moving to the hedge-fund world with time at Paul Singer's Elliott Management. He joined Tiger Global in 2017 and has been a part of investments into startups such as Snowflake, Databricks, Hyperscience, and more.

Alex Sacerdote, founder, Whale Rock Capital

Alex Sacerdote has run $13 billion Whale Rock since 2006 but only began investing in private markets last year. After testing the waters though, the firm has dived into the space, putting $800 million into 20 investments since last April. Checks written by the firm have ranged from $15 million to $100 million.

Names include the Brazilian fintech giant Nubank as well as Divvy, Confluent, and HashiCorp. A person close to the firm told Insider the private-investing strategy is not all that different from how the firm, which invests primarily in technology, evaluates public investments. The investment team evaluates both public and private opportunities simultaneously.

The manager is focusing on later-stage private companies right now and has seen some immediate results — of the nine private investments the firm made in 2020, three have had IPOs, another has been acquired, and one filed to go public.

Michael Lee, head of private investments, Lone Pine Capital

Along with being an analyst on Lone Pine's 14-person investment team, Lee is also in charge of finding private investments for the Tiger Cub, which was founded by the billionaire Stephen Mandel Jr. and now run by the firm's three portfolio managers, David Craver, Kelly Granat, and Mala Gaonkar.

Among Lee's responsibilities, beyond searching for investment opportunities, is connecting with other private investors who can serve as potential partners in funding rounds, a person close to the firm told Insider. The firm's private-investing focus is in e-commerce, software, and payments, and Lone Pine recently told investors in a letter this year that it is increasing the percentage of its flagship fund that can be invested in private companies from 5% to 15%.

Private bets, which have to be unanimously approved by Craver, Granat, and Gaonkar, include Sweetgreen, Glossier, Outreach, and Torchy's Tacos, among others.

Gaurav Kapadia, founder, XN

The Soroban Capital cofounder Kapadia was originally trading under XN as a family office before accepting outside capital and launching as a hedge fund 12 months ago.

According to the Financial Times, which reported on a letter Kapadia sent investors at the end of last year, his fund can invest up to 35% of assets into private companies. The firm's private portfolio already includes at least 10 investments, including Impossible Foods, the chipmaker Groq, and AMP Robotics. XN led the Series B round for AMP Robotics and the Series C for Manticore Games.

Dan Sundheim, founder, D1 Capital

Viking Global Investors' ex-chief investment officer Dan Sundheim has made waves in private markets since he started his own fund, D1 Capital, in 2018. A little less than a third of D1's capital was invested in private-market bets, Insider reported last year.

This year, the $21 billion hedge fund, under Sundheim's guidance, has led more than 35 investments in privately held startups across the globe, including in the corporate spend management software Ramp, the e-commerce grocery platform Instacart, and the Hong Kong-based trucking company Lalamove.

The fund has also made some high-profile exits in 2021 as portfolio companies like Squarespace and DLocal went public. Sundheim, a legendary networker who one former colleague called "the LeBron James of investing,"hosts a group chat for founders of his portfolio companies to connect and is known for sending late-night musings on the market to them. 

Paul Eisenstein, founder, Vetamer Capital

A new fund that just launched at the beginning of the year, Vetamer aims to play in both the public and private markets and in fintechs. Founded by the Lone Pine veteran Paul Eisenstein, the $350 million manager has already made a few private investments, including the UK-based digital bank Monzo's latest round.

Internally, the managing director Matt Heiman runs point on private investments, with Eisenstein having the final say in all decisions. A person close to the firm described the manager's timeline as Series B and beyond, with a focus on a startup's fit in the overall market to justify the valuation.

Robert Schwartz, managing director, Third Point Ventures

For more than two decades, Robert Schwartz has run the venture arm of the billionaire Dan Loeb's firm out of Menlo Park, California. The firm's investments run across different sectors, primarily technology and healthcare, with a special focus on fintech.

Two of the firm's biggest wins are Upstart, an AI lending platform that Third Point owns over 15% of, and cybersecurity company SentinelOne, which Third Points owns a tenth of. Schwartz has been on the boards of both now-public companies since 2015.

Current portfolio holdings include the Fortnite creator Epic Games and Grab, the Southeast Asian food-delivery app. The firm invested in companies like Lyft, SoFi, and Palantir while they were still privately owned. 

Glen Kacher, founder, Light Street Capital

From Series B to Series F, Light Street Capital has been active in private markets, investing in some of the more promising technology startups, including Chime and Toast.

The founder Glen Kacher played the private markets long before it was typical for hedge funds to do so. He worked at the hedge fund Integral Capital Partners and invested in private companies like OpenTable before starting his own fund in 2010. Integral was started by the early tech investors Roger McNamee, John Powell, and the partners of the venture firm Kleiner Perkins Caufield & Byers, and the firm's portfolio was 25% private companies.

At Light Street, Kacher and his deputies — a group that used to include Jay Kahn, a former partner who has started his own fund this year — are fundraising their second fund focused only on privates, according to Institutional Investor, with the goal of accumulating $350 million.

Prateek Bhide, principal, D1 Capital

The D1 Capital principal Prateek Bhide has followed in the footsteps of his boss, Dan Sundheim, leading growth-stage private investments in the tech sector in addition to public-equity investing. The wealth-management technology platform Addepar is one of his recent wins, with D1 Capital investing $150 million at a valuation more than $2 billion in June.

Bhide joined D1 in its first year, 2018, after five years investing at the hedge fund Farallon Capital Management and two years as an analyst in Blackstone's restructuring group.

Thomas Laffont, cofounder, Coatue

The Tiger Cub Coatue has made 25 private investments in the second quarter alone, making it one of the most active startup investors, rivaling large venture-capital firms, according to CB Insights. The firm, founded by the brothers Philippe and Thomas Laffont, leverages their complementary strengths, with Thomas leading its private-investment strategy.

Under Laffont, Coatue made a name for itself in the startup investing world through early bets on Uber, Lyft, and Snap, while its more recent investments include Airtable, Impossible Foods, and Rivian. Insider reported last year that in unicorn deals in which Coatue participated, it led the funding round half of the time.

Arielle Zuckerberg, partner, Coatue

The Coatue partner Arielle Zuckerberg, the younger sister of the Facebook cofounder Mark Zuckerberg, helped Coatue win a $30 million funding round for the video-streaming startup LiveControl against venture capitalists who were meeting with the firm that same week, Insider reported.

Zuckerberg, who formerly worked at the venture firm Kleiner Perkins Caufield & Byers as well as Google, connected with LiveControl's founder because of her deep understanding of their product informed by her hobby as a DJ. She joined Coatue in 2018 to spearhead their early-stage fund alongside the venture-capital veterans Matt Mazzeo, Yanda Erlich, and Matt Mulvey, per Forbes. 

Colin Beirne, partner, Two Sigma

The quant hedge fund Two Sigma brought its data science-based approach to venture investing in 2012, when Two Sigma Ventures was born. Since then, Two Sigma Ventures has made more than 75 investments, many led by the founder Colin Beirne. Beirne has led rounds at the machine vision startup Compound Eye, the robotics developer Anki, and the onboarding-services platform Remote. The venture firm leverages Two Sigma's data expertise in scoping out startups — it built a data-driven artificial-intelligence tool called Georges that creates a weekly list of prospects, Insider reported in May.

Beirne told Insider that Two Sigma Ventures was founded to leverage data science throughout three stages of the investment process — sourcing, evaluation, and support of companies. Beirne said that every year, 100 to 200 of Two Sigma's employees get involved in one of those three stages, partnering directly with Two Sigma Ventures to lend their expertise. 

The venture fund has its own pool of capital, separate from the firm's funds focused on investing in the public markets. 

"While we have a lot of advantages that come from Two Sigma, we operate more like a traditional venture-capital fund," said Beirne. 

Tom Hill, chairman of private investments, Two Sigma

The hedge-fund veteran Tom Hill was appointed to the newly created role of chairman of Two Sigma's private investment business in March. Hill is well known for his 25 years at Blackstone, including as president and CEO of its alternative-asset-management arm and board director of Blackstone Group. He helped build out Blackstone's hedge-fund solutions business from less than $1 billion to more than $75 billion in assets under management before he retired in 2018.

Hill has been advising Two Sigma ever since and now oversees all four of its businesses under the private investment umbrella — Two Sigma Ventures; Two Sigma Real Estate; Two Sigma Impact, a private-equity investment arm focused on workforce impact; and Sightway Capital, also a private-equity business, focused on data-rich companies. 

David Singer, partner, Maverick Capital

The billionaire Lee Ainslie's hedge fund Maverick Capital is not new to private investing. While its public-stock investments brought it lucrative returns ahead of its fellow Tiger Cubs earlier this year, it has been investing in private companies since 2004. The San Francisco-based managing partner David Singer launched and still leads Maverick Ventures, Maverick Capital's dedicated startup investment arm.

In April, Singer raised $600 million for Maverick Ventures' third fund, which is uniquely structured as an open-ended "evergreen fund" without an expiration date, Forbes reported. Singer, who himself is a three-time founder, has focused his efforts investing in healthcare and e-commerce. Notable recent wins include the South Korean e-commerce company Coupang's public debut this year and the primary-care clinic operator OneMedical's IPO last year after Maverick first invested in both in 2011.

Daniel Krizek, portfolio manager, Surveyor Capital

Surveyor Capital, a division of the Chicago-based hedge fund Citadel, is one of several arms of Ken Griffin's firm that invests in public equities, but lately it has expanded more into venture-stage private investments, particularly in healthcare and biotech companies. Surveyor has participated in funding rounds this quarter for Turnstone Biologics Corp., Nimbus Therapeutics, and NiKang Therapeutics, among others. 

Daniel Krizek, who has been with Surveyor since 2017, has led many of these investments in innovative segments like gene therapies, immuno-oncology, and cell therapy. Before joining Surveyor, he spent more than seven years at Bain Capital, where he invested in both private and public healthcare and biotech companies. A person familiar with Citadel told Insider that Krizek has been involved in more than 100 biotech deals in his career and that his team attends dozens of industry conferences and visits the labs of potential investments. 

Originally from the Czech Republic, Krizek has already invested in 35 private companies this year, 15 of which have gone public or were acquired. 

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