CQS Shuts $525 Million Hedge Fund as Narayanan Joins Citadel

CQS is shutting one of its best-performing strategies because the fund’s chief investment officer is leaving to join Citadel, adding to a string of departures from Michael Hintze’s hedge-fund firm.

Prakash Narayanan, who ran CQS Global Relative Value, is exiting after more than three years, according to people with knowledge of the matter. He is joining Citadel’s Global Credit business as a portfolio manager to run a strategy similar to the one at CQS, a spokesman for Citadel confirmed.

Narayanan’s was one of the senior partners that Hintze recently included in a succession plan. His strategy was a rare bright spot for CQS last year when the firm’s hedge funds tumbled, with the Global Relative Value fund surging 30% while Hintze’s flagship money pool slumped by a record 35% as his structured credit bets imploded, according to an investor document.

Narayanan’s fund at CQS is being liquidated and money will be returned to investors on March 1, one of the people said. In his new role, the money manager will be based in London and report to Pablo Salame, head of Global Credit at billionaire Ken Griffin’s investment firm.

Narayanan didn’t respond to a message seeking comment.

Cutting Costs

CQS is grappling with a shrinking hedge-fund business after poor returns and as it shuts non-core strategies to focus on its credit investing roots. The firm managed $21 billion at the end of January, but a vast majority of the assets was in a growing long-only, lower-fee business.

In response, Hintze has moved to cut costs and reduce staff, rolled back an ambitious expansion and stepped up succession planning. Two equity trading teams have also left the firm to manage money outside.

Narayanan, the former partner and head of European operations at Saba Capital Management, joined CQS as a senior money manager in 2017 and worked closely with Hintze’s Directional Opportunities Fund team.

CQS started Global Relative Value in January last year with money from one of its consultant partners, to trade credit products and their derivatives such as credit default swaps. The fund manages $525 million, according to the investor document.

Hintze last year included Narayanan in a group of senior partners, along with Michael Peat, Soraya Chabarek, Craig Scordellis and Jason Walker, to share higher equity stakes and develop a firmwide strategy.

His departure follows the exit of Nick Pappas, one of CQS’s most senior portfolio managers, in December. Pappas left the firm to set up his own distressed debt investing fund in partnership with Ivelina Green, who until September was CQS’s head of special situations investing. Senior money managers Martin Davies and Steve Walters also left in recent months.

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