Brookfield's assets in Europe, which include real estate, infrastructure, and renewable power, have ballooned to around US$110-billion from US$6-billion in 2013.Mark Blinch/Reuters
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Brookfield Asset Management Inc. is expanding its hedge fund business into Europe as the Toronto-based investment group bets on a trading strategy that has delivered stellar returns for some of the industry’s biggest names during the pandemic.
The firm’s Brookfield Hedge Fund Solutions Advisors is a multi-strategy unit trading in areas such as equity market neutral and event-driven, a profitable corner of the industry dominated by the likes of Citadel LLC and Millennium Management LLC.
Until now, the low-profile business, which runs around US$1-billion in assets under management (AUM), has based all its trading teams in New York. But it is now opening an office in London and has begun hiring, according to people familiar with the matter.
The company has recruited William Rushmer, previously a partner at London-based investment firm CZ Capital LLP, to run a long-short strategy in British stocks in London, and plans to expand the business further, one of the people said.
The move by Brookfield, which manages around US$650-billion in AUM globally and is best known for its real estate, infrastructure, and private equity investments, will pit it increasingly against some of the biggest, most established names in the multi-manager hedge fund sector.
Such funds, which employ tens or even hundreds of small teams of traders, have enjoyed a strong period of performance and attracted billions of dollars from investors.
Ken Griffin’s Citadel, which manages US$43-billion, gained 26.3 per cent last year, and made money across credit, commodities, equities, fixed income and macro, and quantitative strategies. In 2020, it made 24.5 per cent.
Izzy Englander’s Millennium Management, which has US$52-billion in AUM, gained around 13 per cent last year, having made 25.6 per cent in 2020, its best performance in two decades, while Steve Cohen’s Point72 Asset Management LP and Balyasny Asset Management LP also made gains last year.
Hedge funds have been helped by their diversification across assets, an ability to cut risk quickly if conditions sour or to fire underperforming managers, and sharp price moves in areas such as commodities.
Data group eVestment says that “2021 will go down as a year dominated by multi-strategy hedge funds,” noting that the bulk of the hedge fund industry’s inflows last year went into this sector.
Hedge funds, which often give autonomy to trading teams within strict risk limits, gained 10.5 per cent on average last year, according to eVestment, just ahead of the overall industry’s average gain. Many investors favour these funds because of the low volatility of their returns and their ability to make money even when managing a large base of assets.
The success of such funds during the pandemic has led to a fierce battle for talent, which has pushed payouts for top traders sky-high. For example, payments just to compensate top traders when they leave a rival can now reach US$10-million and occasionally as much as US$20-million.
Brookfield’s hedge funds business, which is led by Jason Siegel in New York, began running money in 2019.
Brookfield, as a whole, has been investing in Europe for close to 20 years. Its assets in the region, which include real estate, infrastructure and renewable power, have risen to around US$110-billion from US$6-billion in 2013.
Brookfield has declined to comment.
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